Chaos in China: Apple & Amazon ABANDON Factories, Chinese Manufacturing Industry Bankrupt

China is the world's factory. It makes everything from cars to smartphones, machinery and iron. This gives China the largest economy in the world in purchasing power parity terms, worth $40.7 trillion. In nominal terms, it's the second largest with a GDP of $19.2 trillion. But trouble is ahead for China. Its traditional growth engine of manufacturing isn't working anymore. Manufacturers are moving out, and China's exports are suffering. It leaves China scrambling to find alternatives to prevent stagnation or decline. And as you'll soon see in this video, it might not work out. This is a big problem for the CCP. Because as you may already know, no company is truly private in China. The CCP has their hands in every jar. That means when we buy Chinese-made products, we are basically giving money to the CCP, that Xi Jinping then uses to bully the world. Now, I know that if you are watching this video, you are not someone who is happy with the CCP getting your hard-earned money, but it's happening, and it's not your fault. You see, on sites like Amazon, it's nearly impossible to find which product is from China, because Amazon doesn't want to disclose that kind of information. Now, I asked Amazon if there's any way they can add this feature, but I didn't get reply. So, we created a solution to this problem ourselves. We made an extension, ShopSafe, that shows you exactly where any Amazon product is from, so you can now make an informed decision as to what to buy or what not to buy. Unfortunately, for right now, it only works on around 70% of products on the site, but we're working non-stop to make sure it works on everything soon. And on top of this, the extension is completely free, and there's no way for us to make any money from it. We don't want to make money from it. Our goal is just to get big enough that Amazon listens to us and adds this feature to their product pages. My thinking is that Amazon may not listen to me, but maybe they'll listen to all of us? So, you can go and download the extension right now by using the link in the description or using this QR code that's on the screen. Use it, leave a review so more people find it, then hopefully Amazon sees this and adds a feature to their site, and we can all just delete the extension. First, let's back up a little bit and try to understand how China got so good at manufacturing. Not only because this story is so incredible, but because it also helps us explain why China today is very different from the China of 50 years ago, in terms of manufacturing potential. Back in 1978, Deng Xiaoping rose to power as the paramount leader in China, after decades of Mao Zedong. He initiated the reform and opening up policies, which transformed the entire country. At the time, China was a backwards country, with not a lot of industry to speak of and not a lot of prosperity for its people, and really, that's an understatement. Because just two decades prior, millions of people starved to death during the Great Chinese Famine, owing to Mao's disastrous policies. Deng Xiaoping had the courage to look beyond old-school communism and Maoism, owing it to the fact that he was purged twice by Mao during the Cultural Revolution. He strongly believed that China should copy some of the West's ideas. This included free markets, international trade, and an entrepreneurial spirit. He couldn't call this capitalism, though, due to China's historical sensitivities. Instead, he called it a socialist market economy, and socialism with Chinese characteristics. To start, Deng Xiaoping pushed for a special economic zone along China's southeastern coast, where foreign businesses could invest and operate on a free market basis. Not long after, these special economic zones gave rise to some of the most successful manufacturing hubs in human history. Now, at the time, China had a close relationship with the U.S. and the West. In 1979, Deng Xiaoping made an unprecedented step to visit the U.S., and that's why we have a legendary photo of a Chinese communist leader at a Texas rodeo. He was also spending his time on more serious stuff, like touring U.S. factories and meeting with American business leaders. He was doing the same with Japan, with two unprecedented visits to Tokyo in 1978 and 1979. He bridged a huge gap created by the Japanese invasion of China in the Second World War. It allowed China to connect with Japanese businessmen, whom were some of the most successful in the world at the time. Also, we should remember that this was happening right in the middle of the Cold War. China did not like the Soviet Union at this time because of Soviet imperialism, ironic, and the threat on its northern border. The U.S., Japan, and Europe also didn't like the Soviets. That's why they were happy to support China with investments in trade as an anti-Soviet play. The support from other nations was crucial in making China the manufacturing hub of the world. The fact that China could become very powerful one day and start a new Cold War was not really on anybody's mind as of yet. What was on everyone's mind, however, was the kind of money you could make in China. Suddenly, this massive country opened up to world trade. And at the time, in 1980, China was by far the most populous country in the world with nearly a billion people. The labor costs were barely anything for Western standards, with manufacturers paying a few cents per hour. And everyone knew that once China grew its economy, it would become one of the biggest sales markets in the world. That's why all the big players at the time, including most American businesses, moved in. At first, they did this slowly and cautiously. But after China joined the World Trade Organization in 2001, business went all in on outsourcing to China. And by businesses, I mean pretty much all the businesses that manufacture anything. In electronics and tech, China took over everything from making smartphones, laptops, PCs, televisions, washing machines, batteries, lighting, and so on. It also took over much of the clothing and apparel, shoes, and home textile industries. And even the most basic materials like steel, aluminum, and cement are mostly made in China nowadays. The same goes for chemicals, including plastics and pharmaceuticals. China is also moving into industrial machinery and tools, and they're the world's leading car manufacturer now. The effect was predictable, but also stunning. China's GDP went parabolic, going from $1.4 trillion at the time of joining the WTO to nearly $19 trillion now. On the world stage, China wasn't playing on the sidelines anymore. It became the chief rival to the US, and a contender for a global superpower status. Former Secretary of State Anthony Blinken called China the biggest geopolitical test of the 21st century. Through the BRI investment project, China started to use its money from exports to gain influence all over the world. China is also using its resources to fund a massive military expansion that's threatening to disrupt the balance of power in Asia. If trends continue, China could very well become the world's most powerful country in just a couple of decades. But that's a big if. Because in 2025, it's not all that rosy anymore for China. Manufacturing, which has been the backbone of its rise, is halting. Where China's manufacturing industry as a percent of GDP used to be at 32% in 2011, it's rapidly declining and down to 25% of GDP now. Growth in manufacturing has been stagnating ever since 2021 due to the effects of the pandemic and the trade war. And the downturn is far from over. But recently, growth in factory output has hit an 8-month low. But the worst thing of all is that the Chinese economy is in a very big bubble. The Chinese economy and manufacturing sector is kept alive by an increasing amount of debt. We're talking about trillions of dollars. This debt situation is turning into a major problem. And once it breaks down, we could see a collapse of Chinese manufacturing dominance. We'll cover all of this later. But first of all, we have to start at the very basic economics of the Chinese manufacturing operation. Because that's where it starts to go wrong. Chinese manufacturing relies on having the most and the cheapest labor. That was the case in 1979 when the reform started. And it was the case when China joined the WTO in 2001. But it's not the case anymore. Just look at this chart showing the average yearly wages people earn in Chinese manufacturing. In 2013, they earned 46,000 Chinese Yuan. A decade later, it more than doubled to 108,000 Chinese Yuan. Now that's still only about $15,000 and way lower than the US. But it's clearly not as cheap as it used to be. And there are other countries out there with wages of only a couple thousand, significantly undercutting China. Meanwhile, China doesn't even have the most people anymore. India has overtaken China as the most populous country in the world. But it's not just that. China's population is rapidly aging, with the median age already nearly 40 years old. This means that a large and growing part of the population is retiring and not able to work in factories anymore. There are already 22.5 retirees for every 100 working-age people in China. This is called the old-age dependency ratio. By 2050, this could rise to 51 retirees for every 100 working-age people, according to the UN. That's really bad for the economy, especially because the population is also declining at an alarming rate. Last year, China lost 1.39 million people due to low birth rates. And this is only accelerating. This is already having effects on manufacturing. Three years ago, a survey done in China reported that 80% of manufacturers faced labor shortages, ranging from 10 to 30% of the workforce they needed. And according to the Ministry of Human Resources and Social Security, the total labor shortage could rise to 30 million people this year. It's worsened by the fact that the younger generation doesn't want to work in factory jobs at all. A majority of them are now highly educated, with 60% being enrolled in higher education. That means that they want to have a higher-paying job, and they don't want to work on the manufacturing lines. But there's a huge mismatch, because China doesn't have enough white-collar jobs. That's why youth unemployment is in the double digits, while there are also labor shortages and blue-collar manufacturing jobs. Still, the problems in the labor market aren't even the most threatening problems. What's even worse is the trade war with the United States, one of China's biggest customers. In part, this is because of a basic geopolitical calculation. The United States fears that China will take over the role as the global superpower, and it's trying to prevent that from happening through economic pressure. China's geopolitical moves all over the world with the Belt and Road Initiative are only worsening the suspicion against Beijing, and pitting the U.S. against China. The same goes for China's aggression in the South China Sea, along with the potential aggression against Taiwan. It's very clear that the China of today isn't the China that it was 20 years ago. Back then, China wasn't powerful enough to threaten the world order. Now, it has become the biggest security threat by far. But it's not just power politics that matter here. The United States also has its economic interests to defend, and let's just say that China hasn't been dealing fairly with its trade partner. The wave of outsourcing to China has dismantled a large part of the American industry, causing 3.7 million Americans between 2001 and 2018 to lose their jobs. In the meantime, China has taken over a lot of America's market share in total global manufacturing output. The worst thing about it was that, in return for giving away manufacturing, America faced a closed door in China. It's incredibly hard for American businesses to start selling products in China. They're faced with complicated regulations favoring Chinese businesses, and even worse, with Chinese businesses that copy everything. According to an American congressional estimate, Chinese businesses steal $225 to $600 billion worth of intellectual property every year. They've been doing this for decades. What this means is that they steal American designs, trade secrets, research, and more. But American businesses can't do anything about it, because the CCP is more than happy to support Chinese businesses that are doing this. On top of that, the Chinese government gives tons of subsidies and other advantages to its own industries. This might seem like a domestic issue, but other countries don't it because it distorts the free market. Foreign companies who don't get that kind of support start to struggle. Basically, China can use subsidies to kill foreign competition in order to win monopolies in crucial sectors. And if you add all of these together, you start to get the picture that America's $295 billion trade deficit with China isn't just some law of economics. It's China trying to rip off its number one competitor. Now, everyone understands that when you don't play nicely, people are going to respond in kind. With President Trump's recent tariff escalation, the time has come for China to face the consequences. The tariffs threaten one of the most crucial parts of the Chinese economy, namely the manufacturing industry that thrives off of exports. In 2024, China exported a total of $3.6 trillion, of which at least $439 billion is exported to the US, but probably much more. We also have to take into account the effects of China rerouting its exports to countries like Vietnam, Hong Kong, Singapore, Mexico, and Canada that helps it to avoid tariffs, but indirectly supports the Chinese economy. Although President Trump's own figure of China's $1 trillion surplus is probably an overstatement, China's exports are bigger than the official trade figures suggest. In a way, this makes China dependent on the US. According to Goldman Sachs analysts, about 16 million Chinese jobs are involved in making goods for the US, which is nearly 2% of all the jobs in China and over 10% of all manufacturing jobs. Clearly, China will take a big hit because of the trade war with the US. But on the other hand, it wouldn't be the end of the story for China's manufacturing industry. It would be even worse for China to lose its trade with the European and Asian markets. China currently exports slightly more to the European Union than to the United States, and China's exports to the ASEAN countries in Southeast Asia outweigh both the US and the EU. Other markets like Japan, South Korea, India, and Russia are also important for China, and although it's small right now, China's trade with countries in South America and Africa is one of the main areas for growth. However, all these export markets carry risks for China. Various Asian countries are not comfortable with China's geopolitical ambitions. This includes Japan, India, Vietnam, and the Philippines, who don't want China to be militarily dominant in the Asia-Pacific region. A major issue is the South China Sea, which is disputed between China, Taiwan, Vietnam, Malaysia, Brunei, and the Philippines. The South China Sea is also a very important waterway, where about a third of maritime global trade flows through. There's also a lot of strategic military value to the area, especially on the Spratly and Paracel Islands. And most importantly, the sea holds an unknown amount of oil and gas, and China estimates the value of this to be at 60 trillion dollars. If true, this would be enough to fuel the Chinese economy for decades. But obviously, the other nations in the area aren't going to accept it when China tries to take their resources. They're also not going to accept China's military dominance, which would be a huge security threat to the region. So, in a time of geopolitical turmoil, China could lose its access to these vital Asian markets. Meanwhile, all of China's trade partners, not just the US, have their own economic interests. They want to grow their own economies, create jobs, and not be in a constant trade deficit with China. And yes, a trade deficit doesn't say everything. Most economists agree that trade deficits are not inherently bad, especially for developed economies. But for a country like India, Vietnam, or Indonesia, it's not great. They have lower wages than China, so ideally, they should be doing the manufacturing, selling their products abroad, and growing their economies from it, not the other way around. Obviously, China doesn't want other countries to get a piece of the pie, and they've long been trying to stay ahead of their competitors. But that time might be over. China's manufacturing position internationally is declining, and the shift out of China has begun. It's mainly happening in the low-value-added categories, like textiles, apparel, and assembly, that rely heavily on labor. Because China lost the low-labor-cost advantage, its global export share in these product categories has already declined from 40% in 2013 to less than 32% now. One of the countries that's taking on China's manufacturing industry is India. It has more workers than China, with a working-age population of 961 million people, compared to 858 million. Meanwhile, manufacturing wages are up to 7 times cheaper than in China, varying by region. So, for low-cost and labor-intensive manufacturing, India seems to have better fundamentals than China. That's why big brands, including Apple, are rapidly shifting their manufacturing from China to India. This is also a geopolitical play, because companies don't want to be over-reliant on China anymore because of the risks associated with China. If something like an invasion of Taiwan does happen, they don't want to be stuck in China. Now, in the long-term, India could copy many of China's industries and race ahead to balance Beijing. It would be terrible for China's power projection, because it places a huge competitor right at its doorstep in the South. It's also not exactly a China-friendly country, because it has a long-standing border dispute with Beijing. And China's alliance with Pakistan, India's biggest enemy, doesn't help either. It won't just be India that takes over Chinese manufacturing. Vietnam is also becoming a manufacturing hub to be reckoned with, because it's making the things that China does and doing it cheaper. The manufacturing industry has become the pillar for Vietnam's economic miracle, with the Vietnamese economy doubling in 10 years and GDP growing at 7.1% last year. Lots of foreign businesses are outsourcing to Vietnam, including global giants like Samsung, Nvidia, and Google. In a way, Vietnam has been the best example of a country copying the Chinese growth model. It has a similar type of government, with a communist party that abandoned old-school communism and adopted market economics. But, in a way, Vietnam is doing it even better than China. They're not just doing manufacturing for exports, they're also letting domestic consumption play a big role in economic growth, unlike China has done. As we'll cover later, the lack of domestic consumption is becoming a big problem in China. But in Vietnam, they're avoiding this. Meanwhile, other countries in Asia, including Bangladesh, Thailand, Indonesia, and the Philippines, all have the potential to turn into competitors for China. They all have the advantage of lower wages and a more neutral geopolitical position. While they don't compare in population size to India and China, they have more than enough people to take over certain niche sectors. Bangladesh is already very competitive with ready-made garments. Thailand is performing well in automotives and electronics. Indonesia is producing a lot of raw materials. And the Philippines is exporting a lot of semiconductors and integrated circuits. Now, they still import a lot of things from China, because China is so big that it can create an economy of scale in all of these industries. But if they work smart and work together, they can catch up. Interestingly enough, Mexico is also in competition with China. It's not only that wages in Mexico are cheaper, but the country also has easy access to the American market through the USMCA, or the United States-Mexico and Canada Agreement. And because of the trade war tensions between the US and China, many manufacturers prefer to move production closer to home in a trend called nearshoring. This includes the world's biggest auto manufacturers like Ford, General Motors, Toyota, BMW, and many more, but also Procter & Gamble, Caterpillar, and Honeywell. And Mexican manufacturing could take over even more global market share, because it's favored by the world's largest economy. In short, there's lots of problems for China's manufacturing industry, ranging from the labor market, trade wars, and tough competition. But if you look at figures, China's economy is still growing, at a rate of 5% last year to be exact. So the problems can't be that bad, right? Well, it's a little bit more complicated than that. You see, China could have already entered a manufacturing crisis, but it's that the CCP is doing everything to hide it. To understand this, we have to look at China's government deficit. Basically, the Chinese government is using debt to spend more than it's getting through taxes, providing a lifeline to industries including manufacturing. This debt spending is done on multiple levels, by the local governments in order to support their local economies. In 2024, the total government deficit hit 6.5% according to the Fitch Credit Rating Agency. Rhodium Group puts it at 7.7%, and for 2025, the deficit is going to widen even further to 8 or possibly 9%. Meanwhile, they're spending all this money just to hit GDP growth rates of 5%. And spending 8% of GDP to get 5% worth of growth doesn't really seem like a healthy thing to do. It seems like a strategy to trade short-term economic growth for a long-term debt crisis. This is bound to happen in an economic system like China. Local government officials get promoted or demoted based on whether they hit GDP targets or not. And of course, they're going to spend as much as they can to make this happen. The thing is, China's debt situation is becoming a big problem. National debt to GDP is already expected to hit 96% this year. In a few years' time, China is going to match the US in debt to GDP, even though it hasn't reached nearly the same level of economic development and credit worthiness. But the 96% figure doesn't even include China's hidden debt, that is, debt from local government financing vehicles or state-owned enterprises. It's cleverly classified as corporate debt, but in reality, it's directed either by the local governments or by the central government in Beijing. Local government financing vehicles are huge, accounting for 66 trillion yuan or about 9 trillion dollars in debt, according to Bloomberg. That alone is more than half of GDP. State-owned enterprises add another huge chunk to the total corporate debt of 172% of GDP, which is not really corporate debt. Now, if you add all of China's non-financial debt together, so the debt of the households, companies, and the government, you get a debt of 312% of GDP. That kind of leverage is raising serious alarm bells. It means that China can't keep on using the money printer to solve its problems. But without the stimulus worth 8-9% of GDP, China's economy will definitely start to stagnate or decline, especially the manufacturing industry that is receiving a lot of subsidies and government support. This leaves China scrambling to find an alternative for economic growth. And that alternative is simple. It's called domestic consumption. Companies need to make goods and services to sell to the Chinese market, and Chinese households need to buy more of those products and services. Because when Chinese households start spending like American households do, its vast population could help to create the biggest market in the world. There's no doubt about that. But it's not going to happen so quickly. You see, the Chinese economic model has its flaws, and one of those flaws is that it neglected consumption for decades. It was all about investment and production, with the CCP setting targets for local governments who needed to build factories, infrastructure, real estate, and increase exports. This unique model of socialism with Chinese characteristics worked for a long time. But in economics, it's not only about creating growth on the production side. Supply should follow demand. But in China, they've been focused on supply first and foremost. Private consumption lagged behind, and it's at less than 40% of GDP right now. Compare that to 68% of GDP in the United States. If China could catch up in this area, it would more than compensate for the problems in manufacturing. However, transforming the Chinese economy into a consumption-based economy is pretty hard. It's probably harder than it was to turn China into the world's factory. You see, currently, the Chinese economy is making things that it's not really able to consume at home. For example, China makes about 20 billion pieces of clothing a year, and Chinese consumers wouldn't consume all of this themselves. China also exports 4.5 billion units of household appliances a year. Chinese households could never buy that much. The same goes for the 1.7 billion phones it made in 2024, the 340 million laptops, and the 4.5 billion computer chips. It's exporting most of them. But because China's exports are stalling, China has to rebuild its economy to make things that Chinese households actually need and want to buy. And that's a big challenge. First of all, Chinese households would somehow need to spend more money. Currently, the household savings rate is way too high at 32%, meaning that Chinese consumers save 32 out of every 100 yuan they earn. Dave Ramsey would be proud. Recently, total household savings in China hit a record high of 140 trillion yuan, or about 19 trillion dollars. So more money is sitting in the bank than the country earns in a year. That's counterproductive for the Chinese economy, because households need to spend and consume more. For comparison, in the US, households only save 4.5% of their income. It's one of the reasons why the US accounts for about a third of global consumption, despite only having 4.2% of the world's population. As the example of America shows, consumption is a key pillar for economic growth alongside innovation and investment. Now, the reason why Chinese households save a lot of money are complicated. It's a combination of Chinese culture, inflated housing prices, high investment in education, and more. For the moment, it's hard to change these things. However, it's obvious that when households earn more money, they also spend more. Currently, Chinese households don't really receive enough income. Officially, China has a GDP per capita of $13,000. But the disposable income per capita, meaning the money that people can actually spend, is only 41,000 yuan, or about $5,700. So where does this money go? Well, the answer is simple. In China, corporations keep a lot of the money they earn in order to invest and meet CCP growth targets. This keeps wages down, which leads to weak consumption. Now, the CCP is slowly catching up to this reality. It's gotten to the point where the CCP is subsidizing things like microwaves and dishwashers just to boost domestic demand. But it might already be too late. To understand this, we have to look only at the example of Japan. You see, it's striking how many similarities there are between the two. In the 1980s, Japan was about to become the world's biggest economy, or at least a lot of people thought so. By 1995, Japan had a GDP of $5.5 trillion, not too far behind the US's of $7.6 trillion. The main reason was Japan's incredibly successful manufacturing industry with huge exports. But then, the Japanese economy ground to a standstill in what's called the Lost Decades. It started with an asset bubble collapse. Afterwards, the manufacturing industry stopped growing, and Japan's manufacturing output never again reached the heights of 1995. And the reasons sound very familiar. Japan's population declined, leading to rising labor costs and a growing labor shortage. Japan's competitors, mainly China, started to take over market share. And the US, Japan's biggest export market at the time, started to get frustrated with Japan's unfair trade practices. Americans didn't want Japan to race ahead economically, leading to a lot of anti-Japanese sentiment. Out of patriotism, American consumers bought less Japanese cars and electronics. Decades later, it's clear which country won. The US now has a GDP that's seven times greater than that of Japan. Of course, history never repeats itself, but there are many things in common between Japan in the 1990s and China today. And if China gets its own variant of the Lost Decades, it would be terrible for the CCP. First of all, the legitimacy of the CCP is based on a simple social contract. Chinese citizens give up their political freedoms so that the government can provide them with prosperity. Basically, their leader can be a dictator as long as he's a good dictator, which is called government paternalism. But once the economy stops growing, and people stop getting richer every generation, it puts pressure on the social contract. The worse the economic situation, the more opposition to the CCP. This forces the CCP to have more repression, and to be even more authoritarian. It could also be the reason for the CCP to try to find distractions. Some analysts argue that Xi Jinping could attack Taiwan when times get tough for him, just to rally national support. However, an economic crisis would also affect what China could do on the military front. It's Xi Jinping's stated goal to create a world-class military by 2049, meaning a military rivaling or surpassing that of the US. To achieve this, China relies on its economic power to spend hundreds of billions of dollars on its military development. But when the Chinese economy stalls, it would be tough to catch up to America's military might. This makes it very hard for the CCP to achieve its political goals of dominance in the Asia-Pacific and beyond. And having less money for military expansion is not the only reason for this. Currently, China relies on economic diplomacy to get influence across the world with its trade and investment programs. But that only works for as long as the economy is doing well. When China doesn't have anything to offer anymore, these countries lose their interest in Beijing. Meanwhile, other countries like India and Vietnam can catch up, because they start to take over manufacturing. This gives them more economic power, which checks China's regional and global influence. This is all great news for the United States. Washington loves to see a new balance of power in Asia, with no single country taking over. But for China, it's a terrible scenario. Now, if you want to see more videos like this, please consider subscribing, and thanks for watching.