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 the “petromonachies” in 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, clothing… when 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, but… this 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 markets… and, 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 bit… weird... 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 as “The 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-app” that 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 too…or 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 levels” Zhou 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 products… and so on and so forth.

So, we can say that right now the United States’ position as leader is not in particular danger,

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

Long term though… well 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.