FIVE REASONS WHY CHINA WILL NOT OVERTAKE THE USA

Do you really think China is going to become the world's top country? Everyone acts like it is a done deal. But in this video, I’m going to share 5 compelling reasons that will make you question whether China will ACTUALLY take over the world.

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REASON #1 The days of China’s 8-10% annual GDP growth are probably over.

The first indication is that their target for 2023 is only 5%, even though they’re recovering from a major downturn in 2022. And going forward, 4 of their MOST CRUCIAL sources of long-term growth are in question.

First, a HUGE driver of growth over the last 30 years has been government policy that supported opening and reform, but under President Xi, China has reversed course and become more closed and autocratic. There’s been more surveillance, more intervention in the economy and private businesses, more censorship, harsh lockdowns… preserving the party’s power trumps everything.

Second, the entire business model of the property sector, which makes up 20-30% of the economy, is broken. There have already been multiple defaults and business failures, and the government’s recent interventions basically just kick the can down the road instead of actually solving the problem, which reminds me a lot of the Japanese policies that created an army of zombie companies and led to a lost decade.

Third, the government is cracking down on local government financing vehicles, or LGFVs, which drive infrastructure investment and have been one of most important sources of economic growth over last 20 years. The problem is that they’re full of corruption and their debts have BALOONED to almost $10 trillion dollars, about half of the country’s GDP.

And that leads us to our fourth driver, credit aka debt expansion, which has fueled growth for a long time but will NOT be able to continue at the same pace. Debt isn’t just a problem in the LGFVs, it’s a problem throughout the ENTIRE corporate sector. China’s debt ratio hit 300% of GDP last year and the government KNOWS this is a problem, hence the crackdowns on LGFVs and the slower growth target this year. Tackling this problem is a GOOD thing, but it DOES weaken a key source of their long-term growth.

REASON #2 The second reason to be skeptical about China’s inevitable rise is that their plans for expanding their global influence have some serious limitations.

a. The first one is the belt and road initiative, or BRI, which provides loans to build projects in poor countries around the world. Some governments PREFER China because China doesn’t make them do things like respect human rights and implement government policies to help them actually pay the loans back, which are often requirements to get loans or aid from Western countries. However, when something seems too good to be true, it often is, and a lot of countries are starting to figure that out. Generally these loans have come with strings attached, like all the construction contracts go to Chinese companies instead of hiring local workers, and then when the country can’t pay back the debt, China gains influence over them or control of key resources. The strategy has come to be known as “debt trap diplomacy” after Malaysia, Sri Lanka, Pakistan, and literally DOZENS of countries have gotten in trouble with Chinese debt. Not only are these countries now getting a little more skeptical about accepting loans from China, but China is getting a little more skeptical about giving them out, since they’re tired of not getting paid back, so BRI funding has been dropping SIGNIFICANTLY, and thus so has its ability to expand their global influence.

b. The BRI slowdown is just one of MANY reasons that China’s rising global influence may have some serious limitations. The communist party’s increasing control over companies has led to increasing skepticism among foreign governments. A lot of them banned Huawei’s 5G equipment, MANY countries have banned Tik Tok from government devices, India banned it completely, and many mergers and acquisitions around the world have been blocked on national security grounds. Rampant IP theft, things like retaliatory tariffs on Australian wine, a hacking campaign against South Korea, and the lack of an independent judicial system aren’t helping win friends or build trust, either.

c. Another point of contention has been their human rights record. In Xinjiang, they locked up over a million Uyghurs for offenses like having a beard or saying there’s a god. These issues aren’t new and have been widely known, but what’s CHANGING is that more governments have been willing to STAND UP to China lately, which could be a sign of their waning influence.

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