Overcapacity Overload: Why China’s Manufacturing Boom Angers Allies and Foes

hi I'm Dong Jong Welcome to Digging to China where we explore China in depth to reveal unique perspectives Lately we've seen trade tensions flare up between the United States and its allies Could this create an opening for Xi Jinping to dodge the tightening global squeeze on China i don't think so No matter what moves Trump makes I'd argue China can't sidestep this worldwide containment Today let's explore why the world seems to be closing in on China For years when we've talked about this global encirclement the conversation has usually revolved around ideology and diplomacy After sanctions from places like the US and Europe hit China you'd hear patriotic voices those little pinks claiming it's the American Empire out to crush us On the flip side dissident would frame it as a showdown over values and beliefs But today I want to set aside that old diplomatic and ideological lens Let's shift the gears and look at this through an economic perspective Why this global containment feels inevitable let me be clear When I say global encirclement I'm not just talking about the usual players democratic west like Europe and America This includes third world nations too Even Pakistan Now in China's official storytelling Pakistan is the Iron Pack a loyal brother as solid as a steel Some even see it as a junior partner with China calling the shots Yet in 2024 this so-called iron brother took China to the WTO with five trade lawsuits And it's not just Pakistan Russia another supposed steadfast ally also clashed with China over trade in 2024 especially on things China's long been good at like furniture and electric cars Russia hit Chinese goods with the steep tariffs Add to that countries across Latin America and Africa and you see a pattern emerging Data from picking universities institute of international development backs this up Year after year the trade lawsuits piling up against China keep growing In 2024 alone China faced nearly 200 investigations a record height unlike anything we've seen before Dig into these 200 cases and some fascinating details pop up For one China was the most targeted country in 2024 No shocker there But here's the kicker Out of about 400 trade investigations launched by the WTO that year China was named in nearly half almost 200 Even more telling 117 of those came from developing nations So the loudest grumbles about China trade practices aren't coming from the big western powers the US the EU or Canada like you might expect Instead it's these third world countries some of China's so-called iron buddies who've got real great gripes in 2024 Meanwhile Beijing keeps touting tales of friendship with Russia Pakistan and Africa all while deflating domestic frustrations onto the US They filter the news so most folks don't even hear about these trade spats with Chinese good brothers in the developing world So why are these brother nations turning on China how can they smile and shake hands with a shiin ping pocket hefty Chinese loans then quietly file complaints behind the closed doors are they playing China for a fool treating she like an easy mock the answer lies in China's trade setup You've probably caught wind of this in the news China's trade surplus the gap between what it sells and what it buys has been enormous lately Back in 2018 that surplus started ballooning And by 2024 it hit a staggering new peak nearly a trillion US dollars That's a trillion more in exports than imports A figure unmatched anywhere else In just 5 years China's a slice of the global trade surplus shot from 17.5% to 36.6% Here in China plenty of folks cheer this as a triumph And they say "Our surplus is so big the world can't live without Chinese goods How powerful we are." But this giant surplus isn't all good news It's stirring up a lot of troubles Usually when we hear complaints about it they are coming from the US especially with Trump making noise about it lately Trump's been vocal pushing to shrink the trade gap with China He says "China's raking up this huge surplus with us They are taking us for a ride." But honestly for countries like the US and the EU running a trade deficit with China isn't their biggest headache It ties into how currency and trade work together Think about it The world's top reserve currencies are the US dollar the euro and the British pound Together they make up over 80% of global reserves That currency dominance less the US and EU handle big trade deficits is almost built into the system Take US China trade China sells far more to the US than it buys back A classic surplus But it's not just China The US runs deficit with nearly every country They've always they are always buying more than they are selling So how hasn't the US gone broke simple The dollar China's surplus with US turns into dollar reserves The US prints money Folks treat it like gold and that smooths out the imbalance It's the same with the EU That's why China's stirring up sitting on pies piles of dollars and treasury bonds Some might argue hold on doesn't that mean the US is coming out ahead isn't China getting fleeced they just print the cash and get our goods Beijing's line is that a $100 bill cost 17 cents to make Yet it buys a hundred bucks worth of stuff from other countries Isn't that outright a plunder not quite If the US couldn't print money to ease the trade gap then China and the US would need a perfect balance Sell $100 worth buy $100 worth To pull that off China would have to slash exports to the US and ramp up imports big time Easier said than done Boosting Chinese buying power would mean letting the remn climb way up but that would jack up the price of Chinese goods And isn't China's edge all about low costs push prices too high and exports could tank along with the economy So Beijing's claim that dollar dominance is hurting China doesn't really add up Mind you Trump's notion that you can keep the dollar king and still shrink the deficit doesn't fly either The dollar's global status come from those big US trade imbalances Balance everything out and uh where all those extra dollar come from Now step away from giants like the US and the EU and look at the smaller countries That's where the trouble really bruise China's surplus isn't just with the West In the last five years as that surplus soared it grew 1.2 times with ASEAN tripled with Central Asia's five nations and rose 1.3 times with the EU With the US it only crept up 30% Back in 2011 China was buying more than it sold to places like a South Korea Africa ASEAN Central Asia and Japan By 2024 only South Korea still fits that mold Some of this comes from rerouting trade selling to Vietnam say then on to the US to dodge tariffs But China's real surplus with these smaller countries is growing too So how do they handle it if China sells $100 worth to Pakistan or Nigeria but only buys back 20 that leaves a big gap year after year Look at the Pakistan China's trade surplus there hovers between 10 and 20 billion dollars annually How do you square that you can't just take Pakistan rupees like yu dollars or euros No one's banking on those The rupees barely useful globally And with Pakistan shaky government it could crash any day Those savings would be toast So here is what China's done historically sell a 100 bucks worth to Pakistan buy back 20 and the $80 difference they don't take rupees They hand Pakistan an $80 loan Pakistan borrows to buy more Chinese stuff and it evens out That's the big money splashing we've heard about But that tricks wearing thing When countries like Sri Lanka started going bust it got harder to keep up China lend them cash hoping their economy would take off and they pay it back in dollars earned elsewhere Instead they got the loans took the goods and it didn't grow How now they are drowning in debt on the brink of collapse Pakistan's a case in point Its yearly trade adds up to a net loss of over $20 billion more than half from China Even without China they are still in the red Where is the money to repay China since 2023 China has been pulling back on these loans In 2023 and 2024 lending to third world nations dropped And just like that these countries turned They are saying "You've stopped the lending but you keep raking up or racking up surplus with us Aren't you just taking us for all we've got and I can't keep up pakistan's losing 20 billion a year with a GDP of just 300 billion How long can they last they can't print money to offset it Over time they will collapse That's why they are suing China Now why even a place like Niger is pushing Chinese officials out what's China's dream fix upgrade industries Focus on high-tech ditched old stuff Keep a fat surplus with the US and EU by selling more and buying less Stockpiling dollars and euros But with third world nations flip it buy heaps from them cut exports Chinese clothes shouldn't come from China They should come from Pakistan or Bangladesh That's not always bad It could be good Let those countries turn their surplus into remn That's what the US did Move the low-end manufacturing out and balance trade with the dollar But China's not on that path Some might say "Wait made in China 2025 is nearly done right even the US says so And electric costs are booming Sure high-tech exports like electric vehicles are up but it's not the full picture While high-tech grows low-end manufacturing is chugging along too maybe even faster China now holds 64.8% of the global surplus in manufactured goods up from 30% 5 years ago That's a problem It's fighting the US and EU at the top and scraping with the Pakistan at the bottom When Pakistan a country with a per capita GDP of $1,365 sues China at the WTO we should wonder how's China even rivaling a place like that Five lawsuits Why is China still ducking it out with Pakistan shouldn't those low-end jobs go their way but China hasn't let go Traditional manufacturing hasn't involved with the upgrades It's not like electric cars rolled in and swept low-end work away High-ends rising the low ends expanding too For ages China's bragged about the standing alone making everything from screws to cars laughing at America's hollowedout factories But is that full self-reliance worth celebrating i don't think so Why is it like this lots of reasons Uneven skills across the huge population Many are stuck in low-end jobs fallout from the pandemic But the real root I'd say is the Xiinping's supply side obsession He's fixated on production Clinging to that Marxist idea that it's everything that's left China with a wild overcapacity This isn't sustainable A massive surplus isn't a win nor is making everything yourself It's dragging everyone down The big western players they are fine They complain loudest because they can and the Beijing highlights them but they balance it with currency So the hits not too bad Who's really hurting small countries trading with China and the Chinese people Those small nations are in the bind facing debt crisis or eating the imbalance raw and the Chinese workers You are slaving away to out compete a country with a per capita GDP of $1,300 Your job your pay is not going anywhere Great It's a mess for everyone As I said up top with a surplus this big encirclements coming people need to survive too The big money splashing hit it for a while softening the squeeze But by 2024 with that cash flow fading the cracks are showing and they are starting to burst Global containment is already on the horizon Thank you so much for watching If you find this video helpful please like it drop a comment below and hit the subscribe button right here It really helps YouTube suggest my video to others I'll be back with more content soon Until then be