China on the Brink of Collapse Yu Hong Critique | EU Hits China With EV Tariffs
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00:00 Introduction 00:12 EU-China: Tariffs Voted Through 06:15 Yu Hong on The China Collapse View
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Tony argues that while China faces serious structural economic challenges including demographic decline and real estate crisis, it is not a fragile economy on the brink of collapse; rather, it retains sufficient strengths in technology innovation, domestic market scale, and regional dynamism to maintain medium-speed 4-5% growth through 2030 if it implements difficult structural reforms.
- China's technology sector (EVs, batteries, renewable energy, AI) is driving export growth and global competitiveness despite overall economic slowdown
- China's hybrid state capitalism system and vast domestic market create conditions for sustained medium-speed growth despite demographic headwinds
- Structural reforms in SOEs, finance, taxation, and pensions are necessary and beginning, offering path to sustainable growth despite vested interest resistance
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China's old growth model driven by infrastructure investment, export-oriented and energy-intensive industries, and the real estate sector—where investment growth rose faster than economic growth—is not sustainable in the long run, which is why China is abandoning it.
“China's old growth model was driven by infrastructure investment export oriented and energy intensive Industries and the real estate sector to have investment growth rise faster than economic growth it is not sustainable in the long run by abandoning its old growth model China is determined to accelerate its transformation to an innovation driven economic growth model”
German automakers like Mercedes-Benz and Volkswagen have criticized the EU tariffs, calling for further negotiations to avoid escalating trade conflict, though German industry groups also support trade protection while urging continued dialogue.
“the eu's decision has faced resistance from both Germany and of course China German automakers like Mercedes-Benz and Volkswagen criticized the tariffs calling for further negotiations to avoid an escalating trade conflict of course German Autos are heavily exposed to the China Market industry groups in Germany while supporting the use of trade protection also urged both sides to keep talking to prevent the situation from worsening”
China's urbanization rate is low, with permanent population rate at 66% and urban household registration at only 48.3%, and over 200 million migrant workers in urban areas do not yet enjoy the same public services as urban residents.
“compared with countries in the west with advanced economies which have an urbanization rate that is usually above 70 China's urbanization rate is low with a permanent population rate of 66% while Urban household registration is at 48.3% over 200 million of China's migrant workers in urban areas do not yet enjoy the same Public Services as Urban residents”
The United States navigated the EV tariff process more smoothly than the EU because the US had little prior exposure to Chinese EV imports or US EV exports to China, making its decisions easier than the EU's which must balance member states with existing exposure to Chinese markets.
“Unlike the EU the United States navigated this process more smoothly since the measures were preemptive the United States had little prior exposure to Chinese be Imports or US beev exports to China making its decisions easier in”
In late September, the US Commerce Department proposed rules that would prohibit the sale or import of connected vehicles that incorporate certain technology and the import of particular components from countries of concern, specifically China and Russia, citing national security concerns.
“More recently in late September the US Commerce Department proposed rules that would quote prohibit the sale or import of connected vehicles that incorporate certain technology and the import of particular components themselves from countries of concern specifically the People's Republic of China and Russia in quote due to National Security concerns”
Ordinary Chinese residents worry about pressure from the 'three mountains' of education, medical care, and housing, which constrain consumption even as authorities identify it as critical growth driver.
“still worse compared with increasing consumption ordinary Chinese residents are more worried about the pressure of the socalled three mountains of Education Medical Care and housing”
Powerful vested interest groups in China have long resisted domestic structural reforms due to fear of losing power and resources, making these necessary but painful reforms politically difficult.
“in fear of losing power and resources China's various powerful vested interest groups have long resisted these o mentioned domestic reforms”
Postponing the statutory retirement age can slow down the decline of the working-age population and maintain the momentum and vitality of social economic development.
“postponing the statutory retirement age can slow down the decline of the working age population and maintain the momentum and ality of social economic development”
Although China has become the second-largest economy in terms of GDP, it is still a developing country where the middle-income group accounts for about 1/3 of the population (about 400 million people) while more than 2/3 are in the low-income groups.
“although China has jumped to become the second largest economy in terms of per capita income it is still a developing country the middle income group accounts for about 1/3 of the population about 400 million people while there are more than 900 million people in the lwi inome groups or approaching 2/3 below that level”
China had hoped such initiatives in emerging technologies would soften the blow of its painful shift from investment and export-led growth, but the country faces domestic economic slowdown and strong economic headwinds despite moving toward a high-technology economy.
“China had hoped such initiatives would soften the blow of its painful shift from investment and export-led growth whilst China is quickly moving toward a high technology economy with a flourishing technology sector the country faces domestic economic slowdown and strong economic headwinds”
Future stimulus for consumption growth in China is expected to be driven by consumption of medical and health care, culture and entertainment, and financial services rather than current consumer goods.
“in the future the stimulus for consumption growth is expected to be driven by consumption of things such as medical and Health Care culture and entertainment and financial services”
The Chinese Ministry of Commerce criticized the EU ruling and stated that both sides plan to continue talks on October 7th, while China launched its own trade investigations in response and filed a challenge with the WTO.
“In response China launched its own trade investigations the Chinese Ministry of Commerce criticized the ruling saying it will take steps to protect its companies while noting that both sides plan to continue talks on the 7th of October...along with Germany China has lobbied against the and filed a challenge with the WTO”
26 Chinese science and technology clusters made it into the list of the world's top 100 science and technology clusters according to the 2024 Global Innovation Index of the World Intellectual Property Organization, marking the highest representation by any country.
“with the significant increase in its research and development expenditure in recent years China is now the fastest growing and most dynamic Global Market for emerging digital Technologies and leading in paint and applications according to the 2024 Global Innovation index of the world intellectual property organization 26 Chinese Science and Technology clusters made it into the list of the world's top 100 Science and Technology clusters marking the highest representation by any country”
Flooding the global market with Chinese-made technology products has exacerbated trade tensions with Western countries and some developing countries in the global South, which accuse China of dumping overcapacity and causing collapse of domestic industries and rising unemployment.
“however flooding the global market with Chinese made technology products has exacerbated trade tensions with Western countries and some developing countries in the global South these countries are accusing China of dumping its overc capacity onto their markets causing the collapse of related domestic Industries and Rising unemployment”
BYD, a Chinese EV giant, surpassed Tesla to become the world's largest electric vehicle manufacturer in 2023 in terms of total number of cars sold.
“for example byd a Chinese Eevee giant surpassed Tesla to become the world's largest Electric Vehicle Manufacturer in 20123”
Global renewable energy capacity increased by 510 gigawatts with China contributing over half of that increase, and competitive Chinese-made wind turbines and solar panels have been exported to over 200 countries and regions.
“according to a new report titled new years of growth published in 2023 by the world economic Forum which installed renewable energy capacity increased by 510 Kow globally with China contributing over half of that increase competitive chinese-made wind turbines and solar panels have been exported to over 200 countries and regions”
Domestic economic slowdown in China has hit consumer confidence and incomes as more people face layoffs and pay cuts, with millions of college graduates joining the job market struggling to find jobs amid poor prospects.
“the domestic economic slowdown has hit not just consumer confidence but also incomes as more people face layoffs and pay cuts millions of college graduates Jo joining the job market are struggling to find jobs amid poor prospects”
Youth unemployment in China (ages 16-24 excluding college students) reached 18.8% in August 2024, described as 'very high and alarming,' especially given that Chinese authorities suspended releasing figures in 2023 when numbers reached record highs, only resuming with a new methodology that lowered the figures.
“in 2023 Chinese authorities suddenly suspended releasing youth unemployment figures when the numbers reached a record high point china resumed release of the youth unemployment information this year the number is still very high and alarming 18.8% in August for 16 through 24 year olds excluding college students even with applying a new methodology that lowered the figures”
Different regions of China offer economic diversity and internal vitality, with the Guangdong-Hong Kong-Macau Greater Bay Area, Beijing economic area, Yangtze River delta, and Chongqing Twin City Circle being economically dynamic with great growth potential.
“third different regions of China offer economic diversity and internal Vitality the guong Hong Kong maau greater Bay Area the beijin economic area the Yi River delta and the chongu chonging Twin City Circle are economically Dynamic and have great growth potential”
Recent announcements by Chinese authorities delaying retirement age and adjusting the pension system, as well as measures to expand opening of financial and medical sectors to pilot cities, are encouraging moves in the right direction toward necessary structural reform.
“the recent announcements by the Chinese authorities of measures to delay the retirement Aid and the adjustment of the pension system as well as the measures to expand the opening up of the financial and medical sectors to Pilot Chinese cities are encouraging moves in the right direction”
The European Union voted on Friday to impose punitive tariffs on electric vehicles made in China, with duties lasting 5 years starting October 31st, following an investigation showing Chinese EVs were disrupting the European market.
“yesterday Friday European union members voted to impose punitive tariffs on electric vehicles EVS made in China a decision which we've been following for some time now the tariffs which will last for 5 years starting on October the 31st follow an investigation into subsidies that showed Chinese EVS were disrupting the European market”
China downplays socioeconomic concerns by asserting that Western media and politicians are unilaterally exaggerating the problems and challenges of the Chinese economy.
“for its part China has downplay socioeconomic concerns by asserting that Western media and politicians are unilaterally exaggerating the problems and challenges of the Chinese economy”
China is accelerating its transformation to an innovation-driven economic growth model focusing on 'New Quality Productive Forces' with surging exports of Chinese-made technology products like electric vehicles, batteries, and renewable energy products powering Chinese economic growth.
“by abandoning its old growth model China is determined to accelerate its transformation to an innovation driven economic growth model focusing on the so-called New Quality productive forces The Surge and exports of many chinese-made technology products prods such as electric vehicles EVS batteries and Renewable Energy Products is powering Chinese economic growth”
Just as it was unwise to bet on the decline of the US, it is unwise to underestimate the resilience and growth potential of the Chinese economy.
“just as it was unwise to bet on the decline of the US never underestimate the resilience and growth potential of the Chinese economy”
Despite talk of multinational companies decoupling or de-risking from China, few ever actually go down this path because the pull of the world's second-largest market is irresistible, and China's expanding middle class bolstered by a large consumer base drives substantial demand for consumer purchases from smartphones to tech-laden EVs.
“despite all the talk about multinational companies decoupling or drisking from China the reality is that few ever go down this path China s offers a dynamic Market of unmatched scale to both foreign and domestic companies the law of the world's second largest market is irresistible China's expanding middle class bolstered by a large tix heavy consumer base has driven substantial demand for Consumer purchases ranging from smartphones to Tech Laden EVS”
Proper management of China's economy in these challenging times requires a paradigm shift of governance to an approach that is transparent, competent, less discretionary, but also non-interfering, which is necessary if China is to achieve its economic growth target.
“however proper management of the Chinese economy in these challenging times require a paradigm shift of governance to an approach that is transparent competent less discretionary but also non-interfering importantly without commitment to the required domestic structural reforms...China's economy will not be able to achieve its economic growth Target”
China's hybrid state capitalism system has undeniable strengths because on one hand the whole-of-nation approach to innovation can marshal almost unlimited state resources, and on the other hand the rise of China's technology sectors is built not only on centralized control and planning but also features ruthless local competition that produces global champions.
“China's hybrid State capitalism system has undeniable strengths on the one hand the whole of nation approach to Innovation can Marshall almost unlimited State resources on the other hand the rise of China's technology sectors is not only built on centralized control and planning but also features ruthless local competition that produces Global Champions able to compete in the World Market”
China has experienced a rapid growth rate of around 10% for more than 30 years since opening its doors to the world and implementing Reform and Opening Up, but this kind of growth is coming to an end.
“since the Chinese leadership decided to open China's doors to the world build and implement the policy of Reform and opening up China's economy has experienced a rapid growth rate of around 10% for more than 30 years but this kind of growth is coming to an end”
The number of working-age people in China has continued to decline since 2012 with an average annual decrease of more than 3 million, and according to various projections the proportion of working-age people in the total population will further decrease in the future.
“at the same time the number of working age people in China has continued to decline since 2012 with an average annual decrease of more than 3 million and according to various projections the proportion of working age people in the total population will further decrease in the future”
While EV tariffs deliver on Europe's current political priorities, they come with economic risks following a once-in-a-generation inflation shock, and the prospect of future full-blown global trade wars creates danger of renewed consumer price pressure.
“while EV tariffs deliver on Europe's current political priorities they are not without economic risks coming in the wake of a once in a generation inflation shock the prospect of future full-blown global trade Wars erupting comes with the danger of renewed Consumer Price pressure”
Bloomberg economists predict that China will respond proportionately to the tariffs by targeting non-auto EU imports such as certain agricultural goods.
“Bloomberg economists expressed on the news quote we still think the Chinese government will probably respond proportionately to the tariffs for instance by targeting non-auto EU Imports such as certain agricultural Goods end quote”
The European Commission president Ursula von der Leyen, with support from France, has been pushing for the EU tariff action against Chinese EVs, and this decision is seen as a victory for her position despite resistance from Germany and China.
“This move is seen as a victory for European commission president ursul V Deion who with the support of France has been pushing for action against the influx of subsidized Chinese EVS”
There are commentators who are more pessimistic, arguing that China faces both economic collapse and political disintegration, while others take the opposite view arguing that China's current challenges are only cyclical and that Beijing can achieve sustained high-level growth eventually propelling China to the number one place in the world in coming decades.
“and yet other commentators have been even more pessimistic arguing that China faces both economic collapse and political disintegration yet others take the opposite view arguing that China's current challenges are only cyclical and that Beijing can still achieve sustained high level growth which will eventually Propel it to the number one place in the world in the coming decades”
Canada followed the US suit a few months later, announcing an increase in its tariff rate on Chinese EV imports from 6.1% to 100%.
“Canada followed suit a few months later announcing an increase from a tariff rate of 6.1% to 100% on Chinese EV Imports”
China's national tax revenue collected from January to August 2024 was 12.11 trillion RMB, down 5.3% year-on-year, with main reasons being downward pressure on China's industry, weak domestic demand, and the ongoing crisis in the real estate sector.
“according to data released by China's Ministry of Finance the national tax revenue collected from January to August this year was 12.11 trillion R&B down 5.3% year onye the main reasons for the tax reduction reflect the downward pressure on China's industry and its economy especially the weak domestic demand and the ongoing crisis in the real estate sector”
More than 217 million people in China were over 65 years old in 2023, accounting for 15.4% of China's total population, equivalent to one in every four elderly people in the world being Chinese.
“in 2023 more than 217 million people in China were over 65 years old accounting for 15.4% of China's total population equivalent to one in every four elderly people in the world being Chinese”
Germany's economic minister stated that Europe wants a level playing field but not a trade war, and that if Europe does not react as one, China's aggressive industrial policies will continue in other sectors.
“Germany's economic Minister said in a statement on Instagram quote we want a Level Playing Field and a fair playing field but not a trade war that is why we need a negotiated solution to the issue of countervailing Duties together Europe is strong divided it becomes a porn of others and if Europe does not react as one China's aggressive industrial war will continue in other sectors too end quote”
On the channel, Tony has documented China going through a painful, prolonged structural slowdown facing policy challenges which, if mismanaged, could result in Japan-style stagflation or worse.
“on China update we have seen a China going through a painful prolonged structural slowdown facing policy challenges which if mismanaged could result in Japan style stag or worse”
China is not a fragile country on the brink of collapse; in 2023, China's GDP grew by 5.2% and contributed more than 30% to world economic growth, making it one of the world's fastest-growing major economies.
“nevertheless China is not a fragile country on the brink of collapse in 2023 China's GDP grew by 5.2% contributing more than 30% to World economic growth as the world's second largest economy in market exchange rate terms China s has one of the highest economic growth rates among the world's major economies”
China has a domestic market with huge potential and vast space for internal development, and the argument for 'Peak China' is shortsighted and wrong.
“China has a domestic Market with huge potential and there is a vast space for internal development the argument for the so-called Peak China is shortsighted and wrong”