![[images/Why Hasnt China Collapsed.webp]] **Creator:** Maxinomics · **Published:** 2025-06-03 · **Length:** 19:59 · [Watch on YouTube](https://www.youtube.com/watch?v=hvwBSOgOmRE) > *China is pulling off something we've literally never seen before—growing faster than America after WWII, faster than Britain at its peak. How does a country of 1.4 billion, historically stuck in cycles of chaos and unity, suddenly become predictable? It all comes down to one leader, one party, and one strategy. Here's how China actually works.* (video description) ## 1) Detailed outline ### [0:00] Intro - Phil opens with the claim that no country has ever grown as fast as China, not the U.S. after World War II and not England at its peak. - For more than a thousand years China cycled through warring, splitting, and unifying. Today it is led by one man at the head of one party whose whole aim is that outcomes are not random and there are no surprises. - Understand how power flows and how decisions get made, he says, and China stops being a puzzle and becomes a map. The video covers four things: who has control, what gets made, what the people can do, and how China deals with the rest of the world. ### [0:42] Who has power - China is about 4,000 miles wide and spans five time zones, yet runs on one clock, Beijing time, because Beijing is where the Chinese Communist Party (CCP) sits, where the emperors once lived, and the epicenter of the country. - The Mandarin name for China, Zhongguo, means "Middle Kingdom," and "middle" here means most important, the center of the universe. With that accepted as national identity, the leader of the center of the universe is naturally granted total control. - After World War II, China resumed the civil war it had paused to fight Japan. Four years later the CCP won, made itself the only party, and the defeated side (which wanted a democracy) fled to Taiwan. That is the root of today's Taiwan tension. - For the next 30 years Mao Zedong ruled with an iron fist. Crops were pulled up and replanted along his train route to make things look good, tens of millions died from bad policy, and political opponents were killed: "classic bad dictator stuff." - After Mao's death the CCP limited leaders to two five-year terms. Xi Jinping, the son of a senior party member, rose through the ranks and moved from Shanghai to the top job, which Phil calls arguably the ultimate leadership role on Earth. - In 2018, with things going well, Xi moved to abolish term limits and the party agreed, making him effectively ruler for life with control over everything, starting with what the country makes. ### [3:18] What the country makes - State-owned enterprises (SOEs) are owned and controlled openly by the CCP across oil, mining, agriculture, shipbuilding, defense, and banking. Phil compares it to the U.S. government owning JPMorgan and every other bank, Lockheed Martin and every other defense company, and ExxonMobil and every other oil company. - Under Mao the state controlled 100% of output. That dipped under 40% after Mao but is back to about 60% and climbing under Xi. - China's stock market is worth about $16 trillion. Listed SOEs make up about $9 trillion of it, and unlisted SOEs account for at least another $9 trillion, dwarfing ordinary private businesses and letting the party pick winners. - Leland Miller of China Beige Book, back from a previous video, explains that SOEs have always existed in communist economies but haven't always worked the way they do under Xi. His firm runs what he calls the largest private data-collection operation in the world focused on China's economy, offering an alternative to official statistics that can see problems the government won't acknowledge. - The playbook: the CCP controls six of the world's biggest banks, whose executives and often entire boards are party members. When Xi says the solar industry should dominate globally, the banks lend lots of money to Chinese solar firms at rates far below other sectors. - A young U.S. solar company borrowing from banks that don't answer to the government might pay 8% to 10%, so the Chinese firm can price panels 8% to 10% lower without doing anything differently. - Beyond the banks, State Grid Corporation of China (about 80% of the grid) gives new factories favorable hookups, and Aluminum Corporation of China (Chalco) fills their orders first. Stacking the deck this way is how China came to dominate solar, shipbuilding, batteries, EVs, and steel. - Miller adds that the party now designates advanced manufacturing and advanced technology as national-security priorities that get credit, while the rest of the economy, sprayed with loans after the global financial crisis, is cut off: "That's over. That is done." ### [7:53] What the people can do - For a long time, where you were born in China was where you lived. The hukou system decides where people may move, with a booklet that works much like a passport. - Moving from the countryside to Beijing and getting Beijing hukou is nearly impossible without special skills or connections. You can go, but hukou holders get real housing, good schools, and public health care, while everyone else gets dorms or factory housing, migrant schools, and cash or private insurance, plus a real social stigma. - That makes hukou a powerful tool for steering migration. In the 1980s the CCP created special economic zones and granted land rights to companies building factories there. - Shenzhen was a coastal village of about 30,000 people in 1980. Forty years later it has about 18 million residents (growth of 17.97 million, "more than two New Yorks") and probably made your iPhone or TV. Relaxed hukou rules and factory jobs drew 18 million there and another 100 million to a handful of similar zones. People weren't forced; they were offered a better carrot and took it. - Speech is controlled like migration. City dwellers may be anonymous to passersby but not to security cameras, and they can't have burner accounts or browse freely. Phil jokes that this is where a VPN ad should go. - Tiananmen Square marked the end of what free speech there was. The Great Firewall went up in 1998, cutting the Chinese internet off from the global one. - The Firewall Cafe tool shows Google image results next to those from Baidu, China's search engine. After a 2010s meme compared Xi to Winnie the Pooh, Pooh images were scrubbed; the only one left on Baidu is the back of the bear. A Tiananmen search on Google shows the Tank Man; nothing like it appears on the Chinese internet. - Jack Ma, Alibaba's founder, gave a Shanghai speech saying Chinese banks "operate like pawn shops," lending only against assets rather than good ideas. It came three days before Ant Financial's planned IPO, which at a roughly $300 billion valuation was set to be the biggest ever. - The CCP took it as a direct challenge. Within hours, the video says, Xi personally called to stop the IPO; it was cancelled, Ant was folded under the state (the video says into the People's Bank of China), and Ma, then China's richest man, vanished from public view for three months. - Miller says Ma is just the best-known case: companies that "did the wrong thing" were cut down, barred from raising capital, and their leaders sometimes disappeared. Beijing has direct and indirect levers, and misbehavior carries a price. ### [12:54] We've seen all of this before - Total centralized control was the dream of the Soviet Union and Imperial Japan, and it failed spectacularly each time (a clip plays of "Mr. Gorbachev, tear down this wall!"). - Since Mao, though, the CCP has done what every communist, socialist, or authoritarian state wanted: by measures like GDP, China is a smashing success while rejecting Western values. - The core difference is the release valve. When the U.S. economy goes bad, voters throw out the ruling party and pressure leaves the system. Under authoritarian rule the release tends to be violent and shatter the whole system, so the CCP must keep the idea that something better exists from taking hold. ### [14:03] How China interacts with the rest of the world - Of 192 countries measured, China has the second-lowest share of immigrants, about 0.07% of the population, and makes fewer than 2,000 new citizens a year. The U.S. has the most immigrants of any country, around 50 million foreign-born residents. - Looking inward is old policy. In the 1700s Canton (today's Guangzhou, upriver from Hong Kong) was the only port where foreign ships could enter, with one anchorage and one patch of land where foreigners could trade with Chinese people. The Canton System lasted almost 100 years to keep foreign influence out. - Britain, fed up with the trade terms, went to war and won the Opium Wars. The 1842 treaty forced China to open five ports, hand Hong Kong to Britain, and loosen up on foreigners, starting what the CCP calls the Century of Humiliation: civil wars, a Japanese invasion, rescue by the U.S. in World War II, and Britain holding Hong Kong. - Once the civil war ended and Mao was gone, the old Canton approach came back. Special economic zones are the modern version, the only places foreign firms can operate with some freedom, and the Great Firewall is the wall around Canton for ideas. - China would avoid the outside world if it could, but it can't, for two reasons: it lacks resources to sustain its population (farmland, oil, natural gas, and materials like sand and quartz for semiconductors), and above all it needs technology, since falling behind leaves you open to stronger militaries. Britain won the Opium Wars with better ships, and Japan invaded with better artillery. ### [16:42] The Catfish Effect - "Some must be let in to make sure that most can be kept out." China gave Tesla special privileges for its first overseas factory in Shanghai: it practically begged, offered free land, and, most important, let Tesla own Tesla China outright. - Phil says no other carmaker with a Chinese factory has kept full control; normally a Chinese partner owns 50% or 51% of the China business. - The catfish effect: drop a catfish in a tank of sardines and they swim harder to survive, staying fresher (and, some say, tastier). Tesla had done that to U.S. automakers, and China wanted the same for its own. - Tesla sold EVs fast in China, which became its second-biggest market, and the stock price reacted. Chinese automakers quickly adopted techniques Tesla pioneered, such as gigacasting, camera-based Autopilot, and battery-cell designs. - That wasn't only copying: Tesla had to source parts from Chinese suppliers who didn't know those techniques until Tesla demanded them. Once they could make the parts for Tesla, they could sell them to anyone, especially local carmakers. China's EV market grew off Tesla's back, and Tesla now sits well down China's EV sales rankings. - Wrap-up: China works through tight top-down control over what gets made, where people can move, and who and what gets into the country. The Soviet Union tried it and historical odds are against China, but Phil leans toward Miller's view. - Miller: for five years people have said China is a day from collapse, next in line after Europe's and America's financial crises. "That is not going to happen," because China runs a noncommercial financial system that doesn't work the way the West's does. - Phil recommends following Leland Miller and China Beige Book on X and teases more videos coming. ## 2) Things mentioned ### Economics and policy ideas - **State-owned enterprises (SOEs):** companies openly owned and run by the CCP, now about 60% of output by the video's figure. - **Directed state credit:** party-controlled banks lending cheaply to favored industries, giving Chinese firms an 8% to 10% price edge over Western rivals paying market rates. - **Industrial policy and picking winners:** coordinated support from banks, the power grid, and suppliers to make Chinese solar, shipbuilding, battery, EV, and steel firms dominant worldwide. - **National-security priority sectors:** advanced manufacturing and advanced technology, per Leland Miller, now favored for credit while loan-fueled sectors from the post-2008 era are cut off. - **Hukou:** China's household-registration system that ties housing, schooling, and health care to where you're registered and lets the state steer migration. - **Special economic zones:** areas created in the 1980s with land grants and relaxed rules for factories and foreign firms, the engine behind Shenzhen's growth. - **The release valve:** elections letting economic pressure out in democracies, compared with the violent breakdowns authoritarian systems risk. - **Immigration and naturalization rates:** China at about 0.07% immigrants and fewer than 2,000 naturalizations a year, versus about 50 million foreign-born people in the U.S. - **Joint-venture ownership rules:** the usual requirement that a Chinese partner own 50% to 51% of a foreign carmaker's China business. - **The catfish effect:** bringing in a strong foreign competitor to push local companies and suppliers to improve. - **Noncommercial financial system:** Miller's reason China won't simply collapse the way market-driven systems can. ### Companies, organizations, and products - **Chinese Communist Party (CCP):** China's only ruling party, based in Beijing. - **China Beige Book:** Leland Miller's firm, which surveys businesses in China as an alternative to official statistics. - **State Grid Corporation of China:** state utility said to control about 80% of the electric grid. - **Aluminum Corporation of China (Chalco):** state aluminum producer that prioritizes favored factories. - **JPMorgan, Lockheed Martin, and ExxonMobil:** U.S. companies used to picture what state ownership would look like in America. - **Alibaba:** e-commerce giant founded by Jack Ma. - **Ant Financial (Ant Group):** Alibaba's fintech affiliate, whose roughly $300 billion IPO was halted after Ma's speech. - **People's Bank of China:** China's central bank, named in the video as where Ant was folded in. - **Baidu:** China's dominant search engine, compared with Google. - **Google:** used in the Firewall Cafe side-by-side image searches. - **Firewall Cafe:** a web tool comparing Google and Baidu image results for the same search. - **Tesla and Tesla China (Gigafactory Shanghai):** the wholly owned Shanghai plant that the video calls China's catfish. - **iPhones and TVs:** products typically assembled in Shenzhen. - **VPNs:** the tools Phil jokes about advertising, used to get around the Great Firewall. - **X (Twitter):** where Phil suggests following China Beige Book. ### Markets and industries - **China's stock market:** about $16 trillion total, with listed SOEs making up about $9 trillion. - **Solar panels:** the main example of state-backed credit driving global dominance. - **Shipbuilding, batteries, EVs, and steel:** other industries where the same playbook worked. - **Oil, mining, agriculture, defense, and banking:** sectors dominated by SOEs. - **China's EV market:** Tesla's second-biggest market, now led by local brands. - **Semiconductors:** an industry China needs imported materials and technology for. - **Farmland, oil, and natural gas:** resources China lacks enough of for its population. ### Places, events, and history - **Beijing and Beijing time:** the single time zone for the whole country. - **Zhongguo, the "Middle Kingdom":** China's name for itself. - **The Chinese Civil War and Taiwan:** the 1949 CCP victory and the defeated side's retreat to Taiwan. - **Mao-era famine and purges:** tens of millions dead from policy and political killings. - **2018 removal of term limits:** the change that let Xi rule indefinitely. - **Shenzhen:** from about 30,000 people in 1980 to about 18 million today. - **Tiananmen Square (1989) and the Tank Man image:** the end of the free-speech era and content censored online. - **Great Firewall (1998):** the system cutting China's internet off from the world. - **Winnie the Pooh meme:** the Xi comparison that led to Pooh images being scrubbed. - **Jack Ma's Shanghai banking speech and the cancelled Ant IPO.** - **Soviet Union and Imperial Japan:** earlier attempts at total centralized control. - **"Mr. Gorbachev, tear down this wall!":** the archival clip on the fall of Soviet-style control. - **Canton (Guangzhou) and the Canton System:** the single-port foreign-trade system of the 1700s and early 1800s. - **Opium Wars and the 1842 treaty:** opened five ports and ceded Hong Kong to Britain. - **Century of Humiliation:** the CCP's term for the period of foreign defeat and civil war that followed. - **Japanese invasion and World War II.** - **European and American financial crises:** the comparisons people use to predict China is next. ### Technology - **Gigacasting, camera-based Autopilot, and battery cells:** Tesla techniques Chinese automakers and suppliers picked up. - **Security cameras and online identity rules:** the surveillance that limits anonymity and burner accounts. ## 3) Biographies ### Phil Andrews (presenter) Phil Andrews is the producer and on-camera host of Maxinomics ("the guy in the videos and the comments"), a channel that explains economics, business, and geopolitics through stories. Here he walks through China's system section by section and brings back Leland Miller from an earlier video. ### Leland Miller (guest) Leland Miller is the co-founder and CEO of China Beige Book, a research firm that surveys thousands of businesses in China to give an independent read on its economy. He is a frequent commentator on China's economy and financial system. In the video he explains SOEs, Beijing's directed credit, how errant companies get punished, and why he thinks China won't collapse. ### Xi Jinping (subject) Xi Jinping (born 1953) is general secretary of the Chinese Communist Party and president of China, leading the country since 2012–2013. The son of revolutionary leader Xi Zhongxun, he served as Shanghai party chief in 2007 before joining the top leadership. In 2018 China's legislature removed presidential term limits, and he has since consolidated power, expanded the state's role in the economy, and cracked down on big private tech firms. ### Mao Zedong (mentioned) Mao Zedong (1893–1976) founded the People's Republic of China in 1949 and led it until his death. The Great Leap Forward famine and the Cultural Revolution under his rule killed tens of millions of people. The video credits the reaction to his rule for the CCP's later two-term limit on leaders. ### Jack Ma (mentioned) Jack Ma (born 1964) is a former English teacher who co-founded Alibaba in 1999 and became China's richest person. In a 2020 Shanghai speech he criticized Chinese banks and regulators, and days later Ant Group's planned record IPO was suspended. He largely disappeared from public view for months and later gave up control of Ant. The video frames this as the clearest signal of the party's limits on private power. ### Ronald Reagan (archival) Ronald Reagan (1911–2004) was the 40th U.S. president (1981–1989). His 1987 Berlin speech line "Mr. Gorbachev, tear down this wall!" is the clip used to mark the failure of Soviet-style central control. ### Mikhail Gorbachev (mentioned) Mikhail Gorbachev (1931–2022) was the last leader of the Soviet Union (1985–1991), whose reforms preceded the fall of the Berlin Wall and the Soviet collapse. He is named in the Reagan clip. ### Production credits Producer Phil Andrews; video editor Sarah Kate Gervasoni; motion graphics by Seth Laupus; director of production services Sam Wolf; thumbnail by Tom Grillo; franchise content producer Tariq Abdellatif; chief content officer Devin Emery.