How did China go from POVERTY to becoming a GLOBAL SUPERPOWER? : China Growth case study
Summary
TLDRThis video explores China's remarkable transformation from an impoverished nation to a global economic powerhouse, second only to the United States in GDP. It delves into the strategic policies that fueled China's ascent, such as the open-door policy, establishment of special economic zones, and aggressive investments in future industries like solar and electric vehicles. The video also highlights China's geopolitical strategies, including the Belt and Road Initiative, and concludes with lessons for other nations, emphasizing the importance of leveraging population, future resource planning, and creating geopolitical leverage.
Takeaways
- 🌏 China's economic reforms, particularly the 'open door' policy and the establishment of Special Economic Zones (SEZs), played a pivotal role in its transformation into a global economic powerhouse.
- 🏭 The SEZs attracted foreign investment by offering incentives such as reduced import duties, affordable land, and tax exemptions, which bolstered China's manufacturing sector and earned it the title of 'the world's factory'.
- 💹 China's strategic investments in future industries like solar and electric vehicles (EVs) have positioned it as a dominant player in these sectors, with significant control over the supply chain.
- 🔋 The foresight to secure resources like cobalt in the Democratic Republic of Congo has given China a significant advantage in the EV battery market, as cobalt is a crucial component for these batteries.
- 🌞 China's aggressive push into solar energy, including government support for solar companies despite initial losses, has led to a drastic reduction in the cost of solar energy, making it competitive with fossil fuels.
- 🚀 The Belt and Road Initiative is a key component of China's geopolitical strategy, aimed at enhancing its global influence and economic ties with partner countries.
- 📈 China's economic growth has been astonishing, with a 17 trillion dollar GDP, making it the second-largest economy in the world, just behind the United States.
- 📊 The People's Liberation Army's capabilities have been bolstered by the country's economic growth, reflecting China's ambition to become a global superpower.
- 📈 China's long-term strategic planning and investment in key industries and resources have been instrumental in its rise to global prominence.
- 📚 Lessons for other countries, including India, involve leveraging population size, anticipating future resource demands, and developing strategic geopolitical leverage.
Q & A
What major policy shift in China led to its economic transformation?
-The major policy shift was the 'open door' policy introduced by Deng Xiaoping after Mao Zedong's era, which included the establishment of Special Economic Zones (SEZs) to attract foreign investment and promote economic growth.
How did Special Economic Zones contribute to China's economic growth?
-SEZs contributed by offering foreign companies incentives such as low import duties, cheap land, and tax exemptions, which attracted multinational corporations to set up manufacturing hubs in China, creating jobs and boosting the economy.
What is the significance of China's Belt and Road Initiative in its geopolitical strategy?
-The Belt and Road Initiative is significant as it helps China expand its global influence, secure resources, and strengthen economic ties with participating countries, thereby enhancing its geopolitical leverage.
How did China become a dominant player in the solar energy industry?
-China became dominant by heavily investing in the solar energy supply chain, particularly in polysilicon production, and supporting solar companies through subsidies and funding, even during initial losses, to establish a strong foothold in the industry.
Why did China invest in the Republic of Congo during the 2008 economic crisis?
-China invested in Congo to secure access to its vast cobalt reserves, which are crucial for electric vehicle battery production, demonstrating China's strategic foresight in securing valuable resources for future industries.
What is the role of the People's Liberation Army in China's pursuit of global superpower status?
-The People's Liberation Army has been building up its capabilities, with economic growth providing the resources needed to boost military research and development, contributing to China's overall global power.
How did China's approach to economic policies differ from other countries with cheap labor?
-China's approach differed by not only leveraging cheap labor but also by strategically investing in future industries like solar and electric vehicles, and securing resources like cobalt, which set the stage for long-term economic dominance.
What lessons can India learn from China's economic rise?
-India can learn to effectively utilize its large population, strategically invest in future industries, and develop geopolitical leverage through strategic investments and initiatives.
How did China's economic policies impact the global manufacturing landscape?
-China's policies turned it into the 'world's factory' by attracting global manufacturing, which reshaped the global manufacturing landscape and made China a key player in the global supply chain.
What is the significance of the 'open door' policy in China's economic history?
-The 'open door' policy was significant as it marked a shift from isolation to global integration, leading to rapid economic growth and China's emergence as a global economic powerhouse.
Outlines
🌏 China's Economic Transformation and Global Ambitions
This paragraph discusses China's remarkable economic transformation from an impoverished nation to a global economic powerhouse, second only to the United States in GDP. It highlights China's strategic efforts to become a superpower, including the strengthening of the People's Liberation Army and the Belt and Road Initiative to expand its influence. The script also touches on China's astonishing economic growth, which has been fueled by resources allocated to military research and development. The narrative contrasts China's current status as a leader in futuristic industries like solar and electric power with its past, where the country was struggling with a 60% poverty rate and a predominantly agrarian economy. The video aims to explore the business and political strategies behind China's rise and what lessons other countries, particularly India, can learn from this ascent.
🏭 The Impact of Special Economic Zones on China's Growth
The second paragraph delves into the concept of Special Economic Zones (SEZs) as a catalyst for China's economic boom. It explains how SEZs were established to attract foreign investment by offering incentives such as reduced import duties, affordable land, and minimal taxes. The example of Apple is used to illustrate how these zones benefited both multinational corporations and China's economy. The influx of foreign companies led to job creation, poverty alleviation, and increased tax revenue. The paragraph also discusses how China's low labor costs made it an attractive manufacturing hub, contributing to its status as the 'world's factory.' Additionally, it touches on China's strategic investments in emerging industries like solar and electric vehicles, positioning the country as a dominant player in these sectors.
🔋 China's Dominance in Solar and Electric Vehicle Industries
This paragraph focuses on China's strategic foresight and investment in the solar and electric vehicle (EV) industries. It outlines how China became a monopoly in the solar industry by controlling a significant portion of the global polysilicon and wafer production. The narrative explains the government's support for solar companies, even during initial losses, with the vision of future energy needs. Similarly, the paragraph discusses China's early and aggressive investment in the EV market, particularly in the acquisition of cobalt resources from the Republic of Congo. This strategic move positioned China to dominate the supply chain for EV batteries as the global demand for cobalt surged. The paragraph emphasizes China's ability to leverage its resources and geopolitical strategies to become a superpower in manufacturing and valuable resource control.
📈 Lessons from China's Rise for India and the World
The final paragraph draws lessons from China's economic ascent for other countries, especially India. It emphasizes the importance of leveraging a large population to drive economic growth and the need to anticipate and capitalize on future resource demands. The paragraph also discusses the significance of geopolitical leverage and strategic investments in shaping a country's power and influence. It concludes by encouraging viewers to reflect on India's potential leverages and strategies for the future, highlighting the importance of learning from China's success story.
Mindmap
Keywords
💡Global Economic Powerhouse
💡People's Liberation Army (PLA)
💡Belt and Road Initiative (BRI)
💡Special Economic Zone (SEZ)
💡Open Door Policy
💡Manufacturing Hub
💡Renewable Energy
💡Industrial Revolution
💡Geopolitical Strategy
💡Resource Leverage
Highlights
China's economic reforms in the late 1970s led to it becoming the world's second-largest economy.
The People's Liberation Army has been building up its capabilities, supported by China's astonishing economic growth.
China's Belt and Road Initiative is the most expensive infrastructure project in history, aimed at building China's influence.
China's long-term strategy is to become the world's leading economic power.
China's transformation from a country with a 60% poverty rate to a global economic powerhouse in 45 years.
The open-door policy and the establishment of Special Economic Zones (SEZs) were pivotal in China's economic turnaround.
Foreign companies were attracted to China with incentives like low import duties, land leases, and tax exemptions.
China's strategy to lift its population out of poverty by creating jobs in foreign-invested companies.
China's low labor costs have been a significant factor in attracting global manufacturing.
China's dominance in the solar industry, producing over 80% of the world's polysilicon and 98% of wafers and ingots.
China's foresight in investing in solar energy and electric vehicles (EVs) as part of its global dominance strategy.
China's control over the supply chain of solar energy and its impact on the global industry.
China's strategic investment in the Republic of Congo's cobalt mines to secure a majority share in the world's cobalt reserves.
The geopolitical strategy of China's Belt and Road Initiative to strengthen its global influence.
Lessons for India and other countries from China's rise, including leveraging population and investing in future resources.
The importance of geopolitical leverage and strategic foresight in shaping a nation's global power.
Transcripts
foreign
economy opened up to the rest of the
world a move that ultimately turned
China into a global economic Powerhouse
second in GDP only to the United States
China is engaged in a whole of State
effort to become the world's only
superpower by any means necessary
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the people's Liberation Army has been
building up its capabilities
astonishing economic growth over the
decades has provided resources needed to
boost military research and development
China's belt and Road initiative is the
most expensive infrastructure project in
history the initiative is also building
China's influence I think China's
playing the long game here but they want
to be the number one in economic power
in the world
hi everybody
China has one
Wondries in the world and it is so so
hard to believe that a country that is
known today as the second largest
economy in the world with a 17 trillion
dollar GDP just 45 years back the same
country was crippling with a 60 percent
party rate why on one side today we see
China as a futuristic solar and electric
superpower the same country in the 1970s
was so backward that the Chinese knew
nothing but farming and that too during
the time of industrialization and lastly
while on one side we see this glamorous
skyline of Shanghai it is so hard to
visualize that once upon a time this
country had such a bad economy that
millions of people died due to
starvation so the question is what
exactly happened from 1978 to 2018 that
China went from being an impoverished
country to becoming a global superpower
what exactly were their business and
political strategies that made them so
so powerful and most importantly what
are the lessons that India needs to
learn from the rise of China this video
is brought to you by cuckoo FM but more
on this at the end of the video
this is a story that dates back to late
1970s this is when Mao Zedong was
leading China and the condition of the
country under Mao got so bad that while
the Nazis killed about 15 million people
20 million people were killed under the
Stalin regime but the number of people
who died under Mao Zedong alone is
estimated to be between 50 to 80 million
people and a majority of them died due
to starvation this was majorly because
of the adverse Community principles
adopted by Mao Zedong and his people and
needless to say all these policies
failed and China was crippling with a
party rate of 60 percent
so the question is how did this country
go on to become a superpower and that
too in just 40 years well the answer to
this lies with the policies of this man
named Tang Zhao ping who took charge
after Mao Zedong passed away in 1976.
after visiting multiple countries to
understand their economies tank shopping
came out with some incredible policies
that changed the face of China and one
of the most revolutionizing policies of
all was something called the open door
policy and under this policy they set up
something called the special economic
zone and this growth model is also
something that India is trying to pursue
so let's try to understand how does a
special economic zone function let's say
apple is a company that has been
operating in the US where it took care
of everything so ideation designing
manufacturing and distribution all of it
was done in the US itself but by the
1970s and 80s when the cost of Labor in
the U.S started increasing these type of
companies started Outsourcing their
labor intensive processes as in
manufacturing and assembly started to be
outsourced to the Emerging Markets this
was because the labor cost in these
Emerging Markets was extremely cheap why
because in these countries most of the
people lived in poverty so any bit of
income for them was a lot of income so
this way the American companies got
cheap labor and the people of that
country got a source of income but you
know what guys the biggest challenge for
a company like apple was not labor but
other major expenses like buying land
Building Factory importing the machinery
and importing raw materials and back
then in a non-liberalized country like
India these kind of foreign investments
were either not allowed or import duties
were as high as 100 but in a special
economic zone the government of a
particular country gives special
privileges to eliminate all these four
cost barriers like input Duty land
construction and raw material Import in
this case a country like China would
tell Apple that we will charge you only
one percent import Duty on your machines
give you the land for a 99 year lease
and that too at 110 the cost and thirdly
we will charge you a bare minimum of
just one percent import Duty on raw
materials all you have to do is build
the factory invest a minimum of 10
million dollars or more and start
operating in some cases the government
might even wave off the taxes on profits
for three years if the company needs
time to break even and even after that
if the taxes in Mainline is 33 in a
special economic zone it would be only
15 percent this is the reason why
hundreds of companies from all around
the world started flocking to China to
set up their manufacturing Hub now the
question over here is companies like
apple benefit from this that's fine but
if China gives out such a huge tax
exemption to huge companies like apple
how does China make money well the way
China benefits from this is that when
Apple recruits 20 000 workers to work at
the plant these workers and their
families will be lifted out of poverty
so if each worker gets paid five dollars
per day every month three million
dollars worth of income is coming to the
people of China and what will these
workers do with all this money they
would go on to buy food grocery and
medicines so this way money starts
flowing into the economy and the
government doesn't have to spend on
welfare and subsidies to actually
support these people on top of that
because these people and their families
have been lifted out of poverty they
would send their child to a better
school who would then go on to make 10
times more money after she graduates so
you see an entire generation is being
lifted out of poverty and after 10 years
when the Sons and Daughters of these
workers make money they would go on to
become permanent and premium taxpayers
to the economy of China secondly after
these companies have made hundreds of
millions of dollars worth of Investments
none of them will leave China for the
next 30 years at least and the best part
was that the labor cost in China was so
low that even after 22 years of
liberalization the cost of Labor in
China was 53 times lower than the us so
you can imagine how amazing China was
for the U.S companies
this is the reason why you will see that
the biggest companies in the world
including Apple Tesla Samsung and
hundreds of other companies have their
manufacturing Hub in China in fact today
China is known to be the world's Factory
with more than 20 percent of the entire
world's manufacturing happening in China
itself now the moment I say cheap labor
and China most people would say yeah bro
so what anybody can give out cheap labor
and become developed right because
that's what Bangladesh Vietnam Indonesia
are doing
but you know what guys the Chinese did
not stop there other than becoming the
world's Factory with cheap labor the
Chinese government has an extremely
futuristic approach for their Global
dominance and it's absolutely
mind-boggling to see how far they can
actually think two classy examples of
the same are the solar and EV Industries
you see this chart back in the 1990s the
US was the Pioneer in solar with more
than 40 share of the global PV cell
Market
but then something crazy happens later
on U.S went down to less than 10 share
and China and Taiwan crossed more than
50 percent of the global market share by
2010. now if you look at the process of
making solar panels you will see that
first we have polysilicon which is
melted and shaped into ingots then
ingots are sliced into Wafers Wafers are
doped into cells and finally the cells
are assembled into finished solar panels
and guess what as of 2021 China produced
more than 80 percent of the entire
world's polysilicon and roughly 98 of
the Wafers and ingots the question is
out of all the countries that stand
today how did China become a monopoly
the answer to this lies in this chart
now if you look at the cost of producing
solar energy back in the early 2000s it
was at 750 per megawatt hour whereas the
cost of producing energy from coal was
at 120 to 150 so even though several
solar manufacturing companies popped up
in the US they couldn't make profits and
eventually they had to be shut down
because no one could afford to buy solar
panels at that cost
but the catch over here is that in 2003
four when solar companies started
emerging in China even they started
incurring losses but they survived in
spite of all these losses for the next
15 years you know why because the
government of China recognized the
importance of solar companies 20 years
down the line so the government itself
gave out free land free electricity free
capital and at times even free laborers
who were paid by the state itself so the
government kept these laws making
companies alive with its own money gave
them special rebates for research and
development and kept on funding The
Innovation for solar energy just to make
sure that the solar companies are alive
when the time is right and what happened
next took the entire world by surprise
in the next 20 years by 2019 while the
cost of energy from coal still cost 109
dollars the cost of solar has decreased
by 89 going from 359 dollars to just 40
dollars per megawatt hour and now it's
just eleven dollars per megawatt hour so
for the first time in human history
renewable sources look way cheaper than
fossil fuels now I don't know if you
realize this or not but then this is as
big as oil and today while everybody is
rushing to make solar panels the country
that controls the supply chain of solar
is the superpower of the industry and
who's that now China why because they
bet on solar energy 15 freaking years
back and not just that somehow the think
tank of China also realized that
electric vehicles are going to be the
future and they somehow became a
dominating force in the EV Market also
to tell you about it this story dates
way back to 2007 and 8 and this is when
the world was witnessing one of the
worst economic crisis in its history
let's talk about the speed with which we
are watching this Market deteriorate
we're down over 16 percent down at the
same time has fallen about 8 18 percent
it was the worst day on Wall Street
since the crash of 1987. what started in
America last year has now spread to
every part of the world this could be
the most serious recession in decades
and that means life as most Americans
know it is about to change in some cases
dramatically and while the entire world
was trying to recover China was busy
entering a country called the Republic
of Congo this country was ravaged with
Wars its economy was crippling and
barely any countries were interested in
investing in the Republic of Congo but
suddenly China became extremely friendly
with this nation and provided a 5
billion dollar loan for developing the
infrastructure in Congo now the question
is why would anyone invest in a country
like Congo and that too during a
recession
well as it turns out the Republic of
Congo has the largest Cobalt mine in the
world and why is Cobalt important
because it's one of the most crucial
Metals used for making EV batteries
and guess what Congo has 3.5 million
tons of cobalt reserves as of 2021 and
these mines are so valuable that they
account for 51 of the entire world's
Cobalt Reserves but back in 2008 nobody
bothered to buy Cobalt but this is when
the Chinese sees the opportunity and
signed an infrastructure for mineral
deal with Congo which meant that China
will give Congo money and Loan and in
return Congo will give China the rights
to extract metals and minerals from
Congo
they set up a joint venture way back in
2008 that was named Sino congolize Des
mines and in this Venture the Chinese
have a majority shareholding of 68 so
basically all the Cobalt that comes out
of Congo China gets a majority share of
the profits and what blew my mind is
that almost 70 percent of the Congolese
mining portfolio is under the Chinese
control this is what China started doing
15 years back way before the world took
EVS seriously and now fast forward to 15
years later when every single country is
racing to buy Cobalt when Cobalt prices
have shot up by 400 percent
guess who's selling Cobalt to the world
and now the demand of cobalt is expected
to grow by another 400 in the next eight
years and China is just waiting to show
its dominance to the world this is how
China's extremely futuristic vision and
an aggressive investment strategy have
enabled it to become a superpower not
just in terms of manufacturing but also
with the most valuable resources in the
world and lastly it's the geopolitical
strategy of China that is making it
super powerful a prime example of the
same is the belt and Road initiative
that we have covered in our previous
Series this project started way back in
2013 By the way and is expected to be
completed by 2035. you see that is an
insanely well thought project for 22
long years we've already made a five
part series on it so if you haven't
watched it yet I'll give you a link in
the description
this is how China went from being an
impoverished country to becoming the
second largest economy of the world and
one of the most powerful countries of
the 21st century and this brings me to
the most important part of the episode
and that are the lessons that India and
every other country needs to learn from
the rise of China
before we move on I want to thank our
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download the cuckoo FM app now moving on
to the lessons the first thing we need
to learn is that population is a
double-edged sword if utilized properly
it will go on to make you a superpower
and at the same time if you don't
leverage it it will become your biggest
liability and will crumble your economic
in case of china they turned it into an
asset and became a superpower in just
four decades so as citizens of India
keep an eye on the government policies
and see what the government is doing to
use this humongous population to our
advantage lesson number two the world is
moving towards a new era of Industrial
Revolution and this era will kill the
demand of old resources and bring in
massive demand for new resources so the
question is what are we doing today to
capitalize on the resources that will
become valuable 20 years later the U.S
did this with technology China did this
with solar and Cobalt industry so the
question is what is India doing to bet
on the future and lastly in the world of
geopolitics Leverage is the most
important factor that defines power in
this case the Chinese first leveraged
their labor then they went on to
dominate Cobalt and solar industry and
now they are using their belt and Road
initiative to strengthen their
geopolitical position 20 years down the
line now although the ethics of it are
quite debatable it has undeniably
created a factor of Leverage that the
world is going down to so the question
that we go to ask ourselves now and 20
years down the line is what is the
leverage that India has over the world
that's all from my side to today guys if
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you so much for watching I will see you
in the next one bye bye
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