Transcription
So something really fascinating is happening in China right now, and it has been for quite a long time. Where China is currently repeating the exact mistakes that historically have led to the demise of countless different empires and nations, many of whom you probably haven't even heard of, showing just how frequent these mistakes are and just how almost inevitable the ultimate outcome is.
What's really interesting is that when we look at history, it is littered with the carcasses of many different empires who, while they were around, never imagined that they could actually disappear. But today, most of these empires, the average person knows nothing about. And even those that they do know things about are often very rarely more than historical or archaeological curiosities. And these were people who, in their heyday, were the most powerful people on earth. People that their contemporaries never could have imagined they would actually fall. Never could have imagined that there would be a world without their influence. And yet, here we are.
And the big overarching mistake that took down a lot of these empires comes down to something called overextension. Whether they overextended militarily or whether they overextended economically, most empires, many empires have fallen for the trap of thinking that they can just continually expand and never have any consequences for that. And as they expand, they build up more and more enemies. And simultaneously, the more they expand, they are losing their ability to actually exert the control and influence over the areas they're expanding over that allowed them to be powerful in the first place.
And this is exactly what we're seeing with China right now, where they are not just overextending, but we can actually say with a certainty that China has already overextended beyond its capacity. And we are seeing very real impacts of that right now, which is worth discussing at length in today's video.
Now, before we get specifically into China, it will be helpful for me to briefly cover some historical examples that we can kind of use as the backdrop against which to frame China's current mistakes. Because we can always speculate, we can always project. We can always say that things are a problem. But it really helps when we can see historical examples of specific global empires that thought they would never fall, but did indeed fall by making the same mistakes that China is making today. And there are several different empires that we can point to when we talk about the risk of overextension.
Perhaps one of the most famous examples that China should really pay close attention to today is the British Empire, which of course historically was one of the biggest empires on the globe. The sun never set on the British Empire. And the reason the British Empire was initially able to grow so large was because they leaned into their advantages as a maritime power. They were an island nation, which meant that it was very difficult for other countries to attack them. And that meant that they did not have to have a large standing army and instead they could invest their resources primarily in their navy. And that allowed them to create a global trading empire and defend their trade routes in ways that other continental powers, especially in Europe, couldn't compete with because Britain's competitors had to focus not only on building a navy to compete with Britain, but they would also have to focus on building large standing armies to protect themselves at home because otherwise they could be easily invaded.
And this worked out very well for the British for a long time until the British started looking at their competitors. And you could argue they started trying to be more like their competitors were instead of leaning into their advantages. Britain allowed themselves to get involved in wars like World War I, which did not lean into their advantages. They ended up building, for example, very large continental armies to get engaged in this continental war on Europe. And this overextension, this act of Britain trying to be both a maritime and a continental power ultimately led to their demise, although not all at once. It was obviously very expensive for Britain. And so when they came out of World War I and went very quickly into World War II, they did not have the resources that they otherwise could have had. And they found themselves coming out of World War II, even though they were victorious, with a lot of debt. And they found themselves vastly weakened and they essentially had to just let most of their empire go. Britain, you could argue, made the mistake of trying to be like all of the other empires instead of focusing on their strengths. And as we'll see in today's video, that is exactly what China is doing today to their very great demise.
Now, we'll draw a lot of parallels between the British Empire's ultimate demise and China's likely coming demise very soon. But before we do that, it helps to lay just a few more examples so you can see that this is not just a one-off thing, but that this is actually China making a lot of different mistakes all at the same time, each of which individually has brought down previous empires, and China is making all of the mistakes.
For example, another failed empire in rather recent history is the Napoleonic Empire, the French Empire, where Napoleon charged across Europe and captured much of the European continent, creating a great legacy for himself as one of the greatest historical figures. But in reality, when we look at the end results of what Napoleon did, it's rather underwhelming. Yes, he expanded quickly. Yes, he conquered a lot of territory. Yes, he was a great general. But he expanded so quickly and so far that his empire did not have the ability to actually stay together and they did not build enough structure to cohesively unite the empire. And so very quickly they found themselves, yes, overextended and the Napoleonic Empire fell rather quickly. Even though it was from a historical perspective a rather recent occurrence, when we look at Europe today, not only is it not Napoleonic anymore, but it actually already has several different nations who have already fought in wars against each other long since Napoleon has passed. It's another example of, yes, it's easy to take territory, but holding it is quite another matter. And holding it is what really matters when it comes to the eternal legacy of an empire, which no empire has ever actually achieved.
And so you can extend yourself militarily that way. You can also overextend yourself economically. For example, when you look at the Spanish Empire, which was able to make itself rather powerful essentially on debt, and that made them powerful for a while, but debt has this funny habit of needing to be paid back. And if you can't pay back your debts, eventually people don't want to lend money to you anymore. And the source of your power evaporates from underneath you. And as we'll see today, that is another mistake that China is making.
And we could list more examples of all of these. We could list more examples of empires not playing into their strengths and getting overextended by trying to be everything at once. We could list more examples of people conquering more territory than they're actually able to hold. And we could list more examples of countries financially making themselves look powerful, but eventually the bottom falls out. But for this case, we've provided a real concrete example of each of them.
And so now what I want to show today is how China is making every single one of those mistakes and even more. First, it will help here to compare China to the mistakes of the British Empire, which is now either no more or at least only a shell of its former self, depending on who you ask. Because in the case of China, when we compare it to the British Empire, we find it's a case of the same but opposite. And what I mean by that is the way that the British Empire was a maritime power that overextended itself continentally and found that it couldn't do all things at once. China is the opposite. China is a continental power that is now trying to overextend itself from a maritime perspective, from a naval perspective. They will almost certainly find that they are not capable of doing both well, and when they try to do both, they will find themselves weakened on every edge.
One of the biggest things that everybody knows when it comes to China in the modern day is this idea that China might try to attack and take Taiwan. And the reason that China would do this has to do with an overall Chinese strategy when it comes to naval trade and their maritime power around the area of the South China Sea. China has decided, quite unnecessarily because nobody is actually really pressuring China, that they need to militarily kind of take control of this area to protect their trade routes, or at least that's the excuse they give. In reality, if China is trying to do all these things, it is probably because from a continental perspective, they have found themselves rather butted up against the extent of their expansion. They can't really expand more past the Himalayas towards India, for example. Although they try, they can't really do much. They can't really expand too much more to the west. And perhaps they could expand into Siberia and maybe they will, but that would cause a lot of different problems and maybe we'll get into that later. The point is China is finding itself as a continental power rather at the limits of what it can do. And it is now trying to do both things, and yet China is not actually capable economically of doing both things. And it's not actually capable of mustering enough resources to fight in both areas. So that's the first mistake China is making. Like the British Empire of old, they are trying to do all things at once. And inevitably, when you try to do everything, you just end up doing a lot of things and not doing anything well.
The exception to this though might be if China does try to extend its continental empire. But like I said, that comes with problems of its own. And in this case, China ends up in a situation very similar to Napoleon or also you could also say Hitler when they both tried to conquer all of Europe. Because one option that China has to extend its continental power is to move north into Siberia. And that is something that likely looks very attractive to China at this exact moment because of how weak Russia has made itself with its war against Ukraine. There's a lot of historical reasons that China might want to do this. There's a lot of strategic reasons, etc., etc. I've done entire videos on that. But for the point of this video, I want to point out how if China does such a thing, and they might do it, that would still be a mistake for China, even if it ended up hurting Russia, because China then would find themselves as a continental power overextended.
What a lot of people don't know in the Western world, although they should because there's been news articles about it for decades, is that China's neighbors don't exactly like China. And that goes for the majority of China's neighbors, especially their largest neighbor, which is India, which militarily is actually quite a capable country. They might not be on par with the United States, but they could certainly do some damage to China. And they have some territorial disputes with China that would make them actually want to. And in fact, in the past, India and China have fought small-scale wars against each other over their territorial disputes. So for China, the problem of trying to expand their continental empire by moving to the north into Siberia is that this would put them at war with Russia, which is a nuclear power. And also it would likely make India have an excuse to attack China and maybe India would actually, you know, militarily feel like that was their best opportunity while China itself was kind of distracted on its northern borders. And this would put China in the exact situation that historically has always taken down continental powers, which is a two-front war. As a continental power, the number one thing you want to avoid is a two-front war because it's very difficult to fight war in general, but when you have to have separate supply lines, separate battalions of troops going to every front of your country, and also it means that you can't get supplies in from other areas because every corner of your country is basically surrounded by warfare. That puts you in a very precarious situation, and that is the situation that China would almost certainly find itself in if it tried to expand itself from a continental perspective.
China needs energy in order to exist. China does not have enough energy as a country within itself. So, it has to import energy either from Russia, which they don't really actually have all that much capacity from Russia and they haven't built more, or they have to get the energy through the Straits of Malacca, which runs south kind of nearish to India, but also it's just an easy choke point that anybody at war with China could easily close off. And so whatever move China makes from a continental perspective, they're unlikely to be able to successfully expand because even if from a military perspective they started doing quite well, they would not have enough energy to continue their campaign for long enough while their opponents would. And their lack of energy would also nullify China's main advantage, which is their industrial capacity. Because if you don't have enough energy, it doesn't matter how much industrial capacity you have, you can't use all of it or even most of it. So this problem for China with India is obviously a big problem. But there are some challenges for India itself which in my view make China likely to underestimate the danger and they might actually potentially make a move against Russia if that's what they want to do, not recognizing the reality of how bad a war with India would actually be for China because India, it's difficult but not impossible for India to move a lot of troops into China, etc., etc. China might underestimate its opponent and it might try to overextend itself continentally.
When we look at China right now, it is kind of at the limits of its continental power, bordering on overextension, and they might actually dip into overextension of their continental power while they are simultaneously overextending themselves by dipping into the maritime power. And the reason that China might make these mistakes is because China is currently in a dilemma, and it's a big one, where China has also made the mistake, for example, of the Spanish Empire, where they have overextended themselves financially and they are really, really in a very bad spot financially. And maybe the only way for them to overcome that is by being successful in a continental war. And so that puts China in this dilemma. They have to make one of a lot of different bad decisions. Either they have to make the decision to basically have long-term economic decline, which also leads to long-term military decline and eventually makes them weaker on their borders with their opponents. Or they have to go to war in a war that would almost certainly end up becoming a two-front war. And that would be a major problem for China as well. So China is in a state of maximized expansion. They cannot push any further. And so they either have to risk total collapse or they have to accept contraction over time.
What am I talking about though when I say that China is overextended financially, where they've made the mistakes of the Spanish Empire? And what I'm talking about is China's national debt. And I'm also talking about China's now failed, most people now deem this to have been a failed Belt and Road Initiative, or you may have heard it called China's new Silk Road. So first, let's talk about China's overarching national debt, and then we can talk about the Belt and Road Initiative and how that has become a subset of that national debt that has made China critically vulnerable again, has made China overextended.
So when we look at China's national debt, it's very high. It's about 84% of China's GDP, which when you compare that to, for example, the United States, it might not at first seem high. But there are critical differences. So, for example, the United States national debt is around 124% of our GDP, which means, you know, basically our gross domestic product, however much our country brings in in a year overall, our national debt is 124% of that, which means we would need a full year and a quarter's worth of our productivity to pay our national debt. And China's is about 84%. Now, both numbers are extremely high, but there is a reason that for the United States, this level of debt is sustainable while for China it is completely unsustainable. And that's because the United States currently has reserve currency status. And a lot of people don't know what this means, but it essentially means everybody, or the majority of countries around the world, want access to trade in US dollars. So, there is a demand for US dollars. And long story short, I've made other videos on this. It allows the United States to use our debt as an instrument of growth, basically with little risk, because people are always willing to buy our bonds, which is how you raise debt. And therefore, even though we have a high level of debt, we're also able to not be overexposed because people are still willing to buy more of our debt. And the United States, despite its large national debt, still has a very strong credit rating.
When we look at China, it's a different story because China doesn't have a reserve currency. China has the Chinese yuan, and it is a currency that not a lot of people around the world trust, particularly because obviously you have the Chinese Communist Party. It is a one-party state. Not a lot of people trust them. And so not a lot of people want to own China's money because they're afraid that basically anything could happen. And indeed, we've seen a lot of reckless projects with China's spending. You might see the United States as reckless, and you could argue maybe we have been. But we haven't done what China has done, where they have literally built entire cities that are now empty, where they just have all this overbuilt real estate that nobody is living in, in similar projects like that, where China has tried to be like the United States, but they don't actually have the internal capacity to actually function like the United States. So typically, as the United States generates debt, at least until it gets to a certain point, that debt is productive. And so as the US is generating debt, that debt is building more industry, more technology, etc., etc. Again, there's a reason despite our high debt, people continue to buy our dollars. As China has gotten into debt, a lot of their debt has been unproductive. Yes, they built up a big industrial capacity, but that kind of maxed itself out and now most of their spending is unproductive. And that has been really bad news for China because when you spend money on productive things, you might be in debt, but at least those things can pay back the debt. For China, they spent a lot of money on things that are not generating productive income, and that is making China get in the hole worse and worse and worse. And we would not be surprised to see China's debt eclipse the US debt at some point in the future.
China then is caught in something that's known as a debt trap, where because they have overbuilt, their expenses are very high, higher than their productivity can sustain. And so most Chinese provinces, in order to meet their expenses, have to borrow money. But not a lot of people want to lend to you if you're caught in a debt trap. And so not a lot of people want to buy Chinese bonds, which is the way that you raise more debt to carry on more projects. And so China is stuck in this area where they can't generate enough income for their needs. But they also can't raise capital to produce more income. Again, it's called a trap. It gets worse unless something happens, something gets fixed, something hits the reset button. And a lot of times, that only reset button is a total collapse or a major war. And this is why China might be caught in this trap, where they might have to consider invading Russia, invading Siberia to take a lot of wealth by force because they've reached the extent to where they can actually create more wealth from an economic perspective. Again, they're really trapped.
And this has only been made worse again by China's Belt and Road Initiative, which was a very big gamble, which turned out very poorly for China. If you haven't heard of the Belt and Road Initiative or you just need a refresher, the Belt and Road Initiative was basically China's attempt to build infrastructure all across the world in a lot of countries that didn't have infrastructure. And it was their goal to establish themselves as a world power comparable to the United States, where they figured if they were going into smaller, less wealthy countries and they were building infrastructure, that infrastructure could ultimately tie back to Chinese trade and these people would want to trade with China because China had done so many favors for them. Sounds really good on paper. It really does. And on paper, it's very similar to, for example, how the United States became so influential in the modern world, which was the Marshall Plan, where after World War II, the United States did something very similar to what China attempted to do, where we went into Europe with the Marshall Plan, and we funded a lot of the rebuilding of industry, rebuilding the capacity that was destroyed during World War II.
There's a crucial difference between what the US did with the Marshall Plan and what China attempted to do, which is why the US was successful and China has been very unsuccessful and has only increased their debt. And that is that the United States was rebuilding capacity that had previously proven itself to be productive and successful. China was trying to build industry from the ground up in parts of the world that had not proved themselves to be industrially viable, for example, in terms of natural resources, etc., etc. And so as the US rebuilt infrastructure, that infrastructure was productive and ultimately it has paid off for the United States by giving us more trading partners and long story short, people in the United States can buy a lot of cool stuff, whatever they want. Global trade isn't such a bad thing. It's just deeply misunderstood by a lot of Americans.
China though, they ended up building all this infrastructure and not getting the payback that they were expecting. For example, as China went in to fund the Belt and Road Initiative, kind of the whole concept of this was to give loans to countries that typically were considered too high risk to otherwise get loans. And this could have been for a number of reasons. It could have just been that again, the natural resources weren't there. The potential industrial capacity wasn't there to repay these loans. It could be that the countries are extremely politically unstable because they are guilty of human rights offenses and that makes countries unstable. And unstable countries just economically don't tend to do very well because it's not a lot of incentive to be an entrepreneur if the state itself or some band of marauders that the state failed to control can just come and take all your stuff from you.
China though famously made a lot of bad loans to a lot of countries that otherwise couldn't get funding. And surprise, surprise, now those loans are not being paid back. And the fact that China made loans instead of just giving aid in the first place tells you something. China didn't actually have the capacity to just give people money. They really needed the stuff to be paid back in order for it to be viable for them because they just did not have the capacity like the United States might have when we give foreign aid in the form of grants instead of loans. Although of course, we do both. The point is China was making loans and as they made loans, they overextended themselves. And now that those loans are not being paid back, and they're somewhere above a trillion dollars, I think somewhere like $1.3 trillion worth of loans, they're finding themselves having to nurture those and find a way to hopefully get paid back rather than having invested that money at home. And that is part of the reason that their debt trap has become so bad, because so much of their investment again was allocated towards unproductive capacity, both at home and also abroad.
Long story short, in all of these ways, China has overextended itself because it wanted to see itself as a peer power to the United States. But it didn't understand the fundamental underlying advantages that the United States had that had made it such a powerful force. First of all, that the United States essentially owns its continent. Yes, there's Mexico and Canada also in North America, as well as some other Central American countries nearby, but essentially the United States coast to coast owns its continent. And the other nations that are sharing its continent with the United States are not a threat to the United States. The United States also is a self-contained country which has all the natural resources it could ever need. It might not have the variety of things that it wants, but it can produce enough food for itself in pretty much any circumstances. It can get enough energy for itself in pretty much any circumstances. And this allows the United States to have the benefits of a continental power while having essentially the geopolitical structure of a maritime power, where dollar for dollar, the United States can afford to kind of be both a continental power and a maritime power at the same time, which is an incredibly unique position.
China though, probably to portray legitimacy to its own people because again, you have the one-party state and the one-party state is trying to act like they are superior to everybody. They tried to have all the same advantages of the United States when they didn't have them. And so instead they manufacture those advantages by building a large continental military that they can't really afford and might actually have to fight on a two-front war, which is almost never going to happen to the United States, almost certainly. While also trying to become a maritime power with a navy, even though they could not securely fund their continental power. They tried to act as if they were as wealthy as the United States when they weren't. And so they went and they tried to mimic the United States in building industrial capacity around the world. And as they did that, because they were mimicking it instead of having the real thing, they made a lot of mistakes along the way.
China is overextended. They're overextended financially and they're overextended militarily. And if they want to get out of that conundrum, they have to do military campaigns, which they are unlikely to be successful at in the long term. They might be successful in the short term, but if they are successful in their military campaigns, it will not be a net benefit to them and they're unlikely to hold that territory for very long. For example, if China were to attack Taiwan, the main value of Taiwan, which is the semiconductor fabs, would almost certainly be destroyed and China would find themselves in an expensive war with no resources. If China were to attack and conquer Siberia, even if they were successful, it would take time for China to take advantage of that industrial capacity because they would have to develop it. And remember, China is already capital poor. They have a very hard time raising additional funds for additional development. And at the same time, because India, another longtime opponent of China, and other different opponents might perceive China as weak if they did that, China might find themselves in a war that they couldn't win.
So China is this classic example of an overextended empire. And they don't just match one profile of an overextended empire. They match several profiles of overextended empire all at the same time. And so long-term, China's rise seems to be almost certainly at its upper limit. And we'll see what happens over the next couple of decades. But I'd be very surprised if China gets stronger. I would not be surprised at all if China begins a period of progressive decline.
That said, if you've enjoyed this video, even though it covered a lot, it is just the tip of the iceberg. And I have several other lengthy videos on China where I cover several things that I have no doubt if you found this video interesting and if you watched this long, you'll find those videos very interesting as well. If you did enjoy this video, be sure to like the video and subscribe to the channel. Those things are completely free. They take just a second, but they help me out a lot. And if you've enjoyed this channel for some time, if you enjoy the videos that I put out, also consider supporting the channel more. There are several links in the description by which you can do so. Consider becoming a patron of the channel or a YouTube channel member. I really appreciate all the support, even if it's just a like on the video. So, thank you to everybody who has watched this video this far, and I look forward to seeing you on the next.