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  • China is already a giant.

  • This country is the largest trading power in the world

  • They lead the world with hundreds of products and have one of the largest foreign currency

  • reserves on the entire planet.

  • Not even thepetromonachiesin the Persian Gulf can compete with this giant.

  • And with all of this, it isn't surprising to find some analysts who state that China

  • will pass the United States as the leading economic power

  • But with a lot more inhabitants!

  • However, we usually forget a very important thing, and this is that GDP is not everything,

  • and economic power, the real power, is closely related to corporate power and, when it comes

  • to that, China is still far from reaching the level of the United States.

  • If we look at the top 100 largest companies in the world, 56 are American, and only 11

  • are Chinese.

  • And this is something to really bear in mind because multinationals are in control of foreign

  • investment and of 80% of the world’s exports.

  • Now, the big question is what is going to happen to these Chinese companies in the future?

  • How are things changing?

  • And what can we expect?

  • These are some of the questions we are going to answer in today’s video!

  • The Chinese Giant’s Development

  • The Chinese economy has had an impressive growth rate in the last three decades, and

  • the key was the concept of: “The World’s Factory”.

  • That is what China is known for.

  • They are known as a country that has become a world power and has lifted hundreds of thousands

  • people from poverty with a relatively simple premise: producing everything, and produce

  • it at a low cost.

  • Toys, electronics, tools, clothingwhen you enter a store you are going to find hundreds

  • of products with something in common: they are all manufactured in massive industrial

  • areas located all over China.

  • However, in order for a country to really be the leading economic power, these companies

  • need to start producing much more complex products, and they will have to stop competing

  • on cost and start looking for higher added value.

  • This can include the production of things like capital assets, planes, medical devices,

  • and computer processors.

  • And today, all these sectors are dominated by the large multinationals of the United

  • States, South Korea, Europe, and Japan.

  • It is true, that many leading products are manufactured in China, like the iPhone for

  • example, butthis is not exactly true, because what China actually does is just the

  • assembly.

  • What this means is that the more complex parts are bought from other countries and then they

  • are simply put together in China.

  • To better illustrate this consider that:

  • Each year, China imports more than 200 billion dollars in semiconductors, which are essential

  • in the manufacturing of mobile devices.

  • Just as a comparison, that is more money than what the country spends on petrol!

  • However, Chinese companies have made many advances

  • Today, a fourth of all exports are of capital assets, such as machines, for example, or

  • high tech products.

  • In some sectors like telecommunications, wind turbines, or high speed trains, Chinese companies

  • are the world leaders.

  • And it is not just that, Chinese companies are learning how to make it in the international

  • market.

  • The Great Chinese Conquest

  • 2016 was the 40th anniversary of the end of the cultural revolution: this was a terrifying

  • campaign which Mao organized in order to purify the revolution and finish off all remnants

  • of capitalism in Chinese society.

  • Well, since then, things have changed a lot

  • So much that China is only behind the United States in terms of numbers of multinational

  • companies.

  • Companies in this country are starting to make it to global marketsand, well, they

  • are doing it really well!

  • In 2016, Chinese companies spent the amazing amount of 225 billion dollars in the purchase

  • of foreign companies.

  • In Europe and the United States alone they bought out more than 450 companies.

  • These Chinese companies are buying all kinds of businesses: mining companies, banks, oil

  • companies, pharmaceutical companies, agricultural companies, even luxury hotel chains, jewelry

  • companies and football clubs.

  • Yep, you heard it right, the Chinese, dear viewer, have even bought Inter Milan, and

  • that is just one example.

  • Manchester City gets $400 million Chinese investment deal

  • But, if there is one thing in particular that the Chinese like to invest in, well that would

  • be developing countries.

  • Even though Australia and the United States are the two main countries where the Chinese

  • money is invested, more than half of all Chinese investment is made in emerging countries in

  • Asia, Africa, Latin America and the Middle East.

  • So, we could almost say that, the more risky the country, the more willing the Chinese

  • are to invest.

  • Now this might surprise you, but this isn’t the end of the story

  • Chinese companies are also starting to compete hard.

  • Want some proof of this?

  • Well, if there was only one Chinese company in the top 100 most valuable companies in

  • 2006, there were 14 by the year 2015.

  • Take a look at the smartphone industry alone.

  • Up until recently, having a Chinese phone was a bitweird... right?

  • Well, today, the four main Chinese manufacturers: Oppo, Huawei, Vivo and Xiaomi aren't just

  • more famous than they were a few years ago, they also take more than 10% of the world’s

  • profits in this industry... and this is a figure that is growing more and more every

  • year.

  • How about another example?

  • Lenovo, a Chinese multinational that was born just a few years ago, bought the laptop division

  • of IBM, and is now the largest computer company in the world, and they even supply equipment

  • to the Pentagon!

  • And want even more examples?

  • There’s Haier, the biggest manufacturer of household appliances; or Cofco, a company

  • that’s acquiring land all over the world, like sugar cane plantations in Australia,

  • French vineyards or soy plantations in Brazil.

  • There is also Geely, a car company which became of international note when it bought out Volvo

  • in 2010.

  • Yep, Volvo, that legendary Swedish car brand is now property of the Chinese

  • But, if there is a sector where China is really getting ahead, it is , against all odds, the

  • internet.

  • And I say against all odds because, as you all know, the Chinese net is subject to complete

  • control and censorship by the Chinese government with something known asThe Great Firewall”,

  • which blocks access to Facebook, Google, and the Economist, to name just three.

  • However, in China it’s pretty normal to do everything through apps.

  • For example, when you visit China you rarely pay with credit cards, the most common thing

  • is to pay with a mobile phone using the app Wechat - this is a “super-appthat is

  • like an all-in-one: Facebook, Paypal, Gmail, Twitter etc

  • By the way, Wechat is property of Tencent, one of the top 15 most valuable companies

  • in the world, which is also the world’s largest supplier of online games, and one

  • of the majority shareholders of Tesla.

  • So, by now, you are probably realising that, yep, the Chinese are everywhere.

  • As for  another example of their success, consider Alibaba, an e-commerce company that

  • brings in $450 billion every year.

  • Not bad right?

  • And in China alone they have 400 million clients.

  • As Napoleon said: “Let China sleep, for when she wakes she

  • will shake the world

  • But before we all get scared, think about what it all means: more competition, better

  • prices, better products, and faster technological development

  • As consumers we can benefit a great deal from this transition.

  • Now, it obviously has plenty of risks tooor at least this is what US intelligence agencies

  • are warning.

  • According to the House Permanent Select Committee on Intelligence’s report, Chinese

  • companies cannot be trusted to be free of foreign state influence and thus pose a security

  • threat to the United States and to our systems

  • And then there is the risk for companies, they will have even much more competition

  • although many more opportunities too, which we previously discussed in the video we are

  • linking to on the screen now!

  • But, let’s not get too ahead of ourselves

  • Chinese companies are still far behind in technological terms, and they are in debt,

  • and a lot of it

  • China's corporate debt levels are too high but it will take time to bring them down to

  • more manageable levelsZhou Xiaochuan, Head of the Central Bank of China.

  • And that is not the end of it, don’t forget that China is a dictatorship, and this means

  • that the government has too much power when it comes to corporate decisions.

  • Further the government is rather arbitrary and unpredictable.

  • For example, a few years ago the government  encouraged Chinese companies to try the

  • international market and they would loan them as much money as they needed to do so, but

  • now they have decided they want the opposite

  • If a Chinese company wants to buy out a foreign company, they need the approval of the Chinese

  • Communist Party and there are new tough limitations on money leaving the country.

  • Further to that we have to add censorship, legal uncertainty, trade obstacles, the bad

  • reputation of Chinese productsand so on and so forth.

  • So, we can say that right now the United Statesposition as leader is not in particular danger,

  • unless something changes that is more dramatic than what we are currently seeing.

  • Long term thoughwell who knows

  • So I really hope you enjoyed this video, please hit like if you did, and don’t forget to

  • subscribe if you haven’t already, brand new videos every Monday and Thursday.

  • And don’t forget to check out the Reconsider Media podcasts - they provided the vocals

  • in this episode that aren’t mine.

  • And as always, I’ll see you in the next video.

China is already a giant.

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