Transcription
Most people in the West see China in one of two ways. Either they think it's an economic miracle that's about to take over the world or they believe it's a disaster waiting to happen. But Charlie Munger didn't belong to either camp.
As Warren Buffett's long-time business partner and one of the greatest investors in history, Munger spent decades studying economies around the world. He wasn't interested in politics or media headlines. He cared about one thing above everything else, results. And when he looked at China, he saw something he believed was almost impossible to ignore. In fact, Munger once described China's economic rise as one of the greatest achievements in the history of the world. That's a remarkable statement coming from a lifelong American capitalist. So what did Charlie Munger see that so many other people missed? Let's hear what he had to say.
"What are your current thoughts on China and whether the communist leaders will allow businesses with strong leadership to flourish in decades to come?"
"Well, I think there's the the Chinese government will allow businesses to flourish. It was a one of the most remarkable things that ever happened in the history of the world when a bunch of committed communists just looked at the prosperity of places like Singapore and said the hell with this, we're not going to stay here in poverty. We're going to copy what works. And they changed communism. They just accepted Adam Smith and added it to their communism and they said, now we have communism with Chinese characteristics. Which is China with a free market with a bunch of billionaires and so forth. And they made that shift. They deserve a lot of credit. Warren and I are not quite as good at that as changing our minds in many cases."
"And and that was a remarkable change coming from such a place. And of course it's worked like gangbusters. That is an enormous growth in the average income of the average Chinese. They've lifted 800 million people out of poverty fast. And it There's never anything like it in the history of the world. So, my hat is off to the Chinese. And I think they will continue to allow people to make money. They've learned it works. The Chinese I loved what the guy said in the first place. I don't care whether the cat is black and white as long as it catches mice. That's my kind of talk."
"In that list of the 20 most valuable companies, there's just three are Chinese. Now, if you're if you're looking out 30 years, you know, how many do you think will be Chinese? My guess is more. But uh but I don't think that I don't think they'll top the United States. Uh but who knows? It's it's amazing what what has been accomplished and and"
"Yeah, it's really amazing."
"And they found what works. I mean, there's nothing like finding something that works in order to sort of reinforce ideas over time and we'll see what happens."
To understand why Munger admired China so much, we first need to go back to where the country started. Today, it's easy to think of China as a manufacturing giant filled with skyscrapers, high-speed trains, and some of the world's biggest companies. But just a few decades ago, the country looked completely different. In the late 1970s, China was one of the poorest countries on Earth. Much of the population lived in rural villages, incomes were extremely low, and the country had spent years largely isolated from the global economy. Very few people believed China would ever become an economic superpower. Then, everything changed.
In 1978, Deng Xiaoping became China's new leader and introduced a completely different way of thinking. He famously said, "It doesn't matter whether a cat is black or white as long as it catches mice." It sounds like a simple saying, but it carried a powerful message. Forget ideology. Forget political labels. If a policy improves people's lives, creates jobs, and grows the economy, then use it. Charlie Munger loved this kind of thinking. He believed China's leaders were willing to put practical results ahead of political dogma. Instead of asking whether an idea was capitalist or socialist, they asked a much simpler question. Does it work?
As Munger explained, China didn't abandon state leadership. Instead, it combined government planning with free market competition, creating what became known as socialism with Chinese characteristics. It wasn't a copy of the Soviet Union, and it wasn't a copy of the United States, either. It was something uniquely Chinese.
"China has grown at a rate that for a country that big is unprecedented in the previous history of the world. So, that's a huge development. And it and it's enormously important to the world when that many people start getting ahead year after year at that kind of a percentage rate, it affects the whole world. And it's a huge development. I think we have no sensible alternative except to be very friendly with China, and I think they've got they have no sensible alternative except to be very friendly with us."
"We have people who come on our air, Jim Chanos and others, who worry about the slowdown in China, and who say that it can't Obviously, it can't continue at this >> if it if it's a hard landing, >> extreme is bad. It will eventually stop. China will not grow at real terms at 10% per annum for another 40 years or something."
"But"
"Say what on the world."
"Can they ease into this landing, though? I guess that's the question."
"Well, nobody knows that for sure, do they?"
"No, what do you think though?"
"I would bet that with fluctuations, China continues to do very well with its policies."
"Is there"
"I would argue that in some important respects, they've been smarter than we have."
"What what respects?"
"Their set of policies created by you know, a nominally communist government have actually been very intelligent in driving the welfare of their people ahead at a rapid rate. It's a huge achievement what they've done. I would say, considering where they started"
"Mhm."
"in a communist bureaucracy with widespread starvation and that without any big wars or anything to have transformed a nation that big by a combination of population control and bringing in free market business principles it's one of the most remarkable human achievements in the history of the world. And I I can't help but admire some of the people who caused it. You know, when I meet these modern communist leaders, they look like so many admirals of the navy."
"Mhm."
"They don't look like crazy ideologues of the past."
"Mhm."
"So, what's going on is very peculiar. But they have they have some of the merit of Singapore in modern China. They copied it on purpose. And I regard what happened in Singapore as the the best example of successful governance in the history of the world."
But, here's something many people don't know. China didn't come up with this approach entirely on its own. It looked at a much smaller country for inspiration, Singapore. Today, Singapore is known as one of the richest and most efficient countries in the world. But, when it became independent in 1965, it had almost no natural resources, a growing population, and an uncertain future. Yet, under the leadership of Lee Kuan Yew, Singapore transformed itself into one of the world's leading financial and trading hubs. The government was strong, the economy was open. Businesses were encouraged to compete. Corruption was kept under control. Infrastructure improved rapidly.
When Deng Xiaoping visited Singapore in 1978, he saw firsthand what disciplined leadership combined with market economics could achieve. Charlie Munger often praised Singapore as one of the best governed countries in modern history. And in many ways, China took the same basic ideas, but applied them to a country with more than 1 billion people. Of course, managing a city of 6 million people is one thing. Managing a nation of over 1 billion is something else entirely. That's why Munger believed China's achievements deserved far more recognition than they usually receive.
And perhaps no achievement impressed him more than this, poverty reduction. According to the World Bank, China lifted more than 800 million people out of extreme poverty over the past four decades. Think about that for a moment. That's more than twice the population of the United States. It's roughly the same as the entire population of Europe. Never before in human history has so many people escaped poverty in such a short period of time. Millions of families who once relied on subsistence farming moved into cities, found better paying jobs, bought homes, and joined the rapidly growing middle class. Highways connected remote provinces. Modern airports appeared across the country. Thousands of kilometers of high-speed rail linked major cities together. Whether you admire China's political system or not, the scale of that transformation is difficult to deny. And that's exactly why Munger kept bringing it up. He believed investors should focus on measurable outcomes instead of political narratives.
Another observation Munger made was about the people running China. He once joked that modern Chinese leaders reminded him more of naval admirals than politicians. What did he mean by that? For many years, a large number of China's senior leaders had backgrounds in engineering and technical fields. Instead of approaching problems like lawyers debating ideas, they often approach them like engineers solving practical challenges. Where is the bottleneck? What's slowing economic growth? How do we fix it? Once they found a solution, they scaled it across the country. This mindset helps explain how China built thousands of kilometers of high-speed rail in little more than a decade, along with countless bridges, ports, industrial parks, and modern transportation networks.
Munger wasn't saying China was perfect. No country is. But he believed its leadership was remarkably focused on execution. They weren't just making promises. They were building things. And from an investor's point of view, that's what mattered. This is also why Munger believed China's economic rise was far from over. During discussions with Warren Buffett, he suggested that more Chinese companies would eventually become some of the most valuable businesses in the world. At the moment, American companies like Apple, Microsoft, and Nvidia dominate global markets. But China's companies have become increasingly competitive. BYD has emerged as one of the world's biggest electric vehicle makers. ByteDance built TikTok into a global phenomenon. Chinese e-commerce, renewable energy, battery technology, and artificial intelligence companies continue expanding beyond their home market. Whether they succeed or not, the competition is no longer one-sided. Chinese companies are now competing directly with some of America's biggest corporate giants. And that's another reason Munger believed investors shouldn't underestimate China.
In the end, Charlie Munger's admiration for China wasn't about politics. It wasn't about choosing sides between East and West. It was about staying intellectually honest. He believed that if something produces extraordinary results, you should be willing to acknowledge it, even if it challenges your existing beliefs. That's one of the biggest lessons Munger left behind. Too often, people let ideology shape the way they see the world. Munger preferred to let evidence do the talking. Whether you agree with China's system or not, its economic transformation over the past four decades is one of the most important events in modern history. And according to Charlie Munger, understanding that reality isn't about supporting one country over another. It's about seeing the world as it really is. Because in investing, and perhaps in life, the people who make the best decisions are usually the ones who are willing to look past politics, ignore the noise, and focus on one simple question. What actually works?
What do you think? Was Charlie Munger right about China's rise? Or do you see things differently? Share your thoughts in the comments below. We'd love to hear your perspective. If you enjoyed this video, don't forget to hit the like button, subscribe to the channel, and turn on notifications, so you won't miss our next deep dive into global politics and the stories shaping our world.