What Would Happen if China's Economy Collapses?

China is currently experiencing an unprecedented level of civil unrest as people take to the streets to protest harsh lockdown measures that have been imposed for almost three years. The country's zero-concealment policy has had a significant social cost with news stories about separated families. and doors to people's apartments are welded shut, all in an attempt to stop the spread of a disease that the Chinese population is beginning to realize might not be as bad as the measures taken to prevent it. This most recent upset is just the latest in a long list. of bad news coming from the world's second largest

economy

, an

economy

governed by leaders, that people have no direct say over civil demonstrations protesting lockdown restrictions is nothing new, but within mainland China it is a bit Differently, these protests demand direct political change at the highest levels of government and do not appear to be showing any signs of slowing down.

All of this occurred before the government effectively reversed its covert policy overnight and opened the country to a wave of infection that is suddenly occurring with reports of up to 37 million people a day being caught undercover and forcing entire cities to close again now to make it clear that the possibility of an outright revolution is incredibly small despite

what

some media might present and as we have scoured several times for foreign videos we make covering China is probably a good thing to Despite the understandable animosity that we, as Outsiders, may feel towards China, no one should want the economy to collapse through something like a violent revolution or social collapse, altruistically, we should not want this because the current system is so problematic as it still supports hundreds of millions of economically extremely vulnerable people.

Any kind of widespread disruption to an economy is big and still mostly poor, as China

would

cause untold human suffering among people who have no say in the actions of their own leaders, even if we are being totally selfish. One of the reasons we pay so much attention to China is because we depend on it. Buy many of our raw materials. Invest in many of our economies. It produces a large portion of the consumer items we enjoy. team that we depend on to manage our own economies, so with all the instability in the country right now perhaps it's not a bad time to try to answer some important questions, first and foremost:

what

effect

would

a collapse Chinese economy in the global economy?

What are the most productive ways to minimize the impact this situation could have on our own economies? And finally, could this unfortunate situation actually be positive for certain countries around the world? This episode of Economics Explained was presented by Guardio Guardio. his online bodyguard that will keep him safe from scams, malware, and phishing attempts. It is a browser extension that actually detects threats before they can cause harm, such as installing viruses, tracking what you do, and even stealing your identity. Our browsers store our most sensitive information, such as credentials. information and more, making it a gold mine for scammers and that is why a dedicated product like this is a must.

All you need to do is add the guard extension from the Chrome or Edge store. Once you have installed it, you can get a free security scan. and this is the surprising moment when you discover if your information has already been compromised or if there are threats in your browser. After completing the scan, you can go ahead to get a seven-day free trial and remove those threats and also enable real-time protection and that's what makes it amazing: unlike other programs, it stops all threats before they can Login to your computer, your identity monitoring features across all platforms, so if you sign up via your mobile phone, you will also receive real-time alerts. words, so get cardio now and protect your online browsing and information.

One guard account covers five family members at no additional cost, so it's a great deal if you want to clean and secure a browsing experience, go to guard.io EE, the link is in the description. and check out their affordable Premium plan for full protection, as always. I have to make the big disclaimer that no one can predict the future, least of all economies, and that also applies to hypothetical futures. There is no possible way to know exactly what a Chinese collapse would be. what it would look like and what the situations would be in the rest of the world and if something like that were to

happen

, but that being said, this hypothetical medicine is unprecedented, the Soviet Union was once the second largest economy in the world, it was a heavily industrialized state. with an authoritarian leadership that eventually collapsed in no small part due to civil unrest, economic stagnation, and a series of large-scale disasters, the impact of the Soviet system that collapsed basically overnight across member nations of the Union until it became almost total anarchy when they had to reinvent themselves. a system of government from scratch the country depends directly on the USSR also suffered, but most nations outside of Soviet influence were fine in 1991 the Soviet Union was the third or fourth largest economy in the world behind the US Japan and potentially West Germany, which must have been quite embarrassing considering that the Soviet Union also included East Germany in addition to 14 other member states, which is why we can't be sure if it was the third or fourth largest economy in the world. world at the time of its collapse. is that record-keeping in the union was so corrupt as to be unreliable that institutions like the IMF and World Bank could only rely on their output within a range of about half a trillion dollars at the time, it's probably worth noting China also has systemic problems with producing reliable economic data, but to be fair, it's not as bad as it was during the latter stages of the Soviet Union, regardless of where precisely it stood in relation to the largest economies in the world. world in which the Soviet Union found itself.

It is undeniably very substantial and very influential, but even though this global GDP actually increased after its collapse, this is surprising because, all things being equal, even if the collapse of the Soviet Union had absolutely no impact on no other economy, the very fact that a nation. represent an appreciable percentage of total world production, almost stopping operations entirely should have reduced the average on its own, and it did. In some ways, global economic growth remained positive in the years after the collapse of the Union, but it was below average and declined. by a general trend of high growth of countries such as Japan, Germany, South Korea and, of course, China, which at that time was already really in the rhythm of its economic transition to a market economy.

If you look at this graph long enough, you'll notice that the fall of the Soviet Union did almost as much damage to global economic growth as the oil and gas crisis of the mid-1970s, the recession of the early 1980s, and the stock bubble. las.com combined with the attacks of September 11, 2001. ...since 1961, when the World Bank began actively tracking global GDP figures, its sustained growth has been fairly consistent, only falling into negative growth twice, once in 2008 during the global financial crisis and once in 2020 during the pandemic, now neither of these periods were particularly fun. when a global slowdown was actually caused by a more concentrated slowdown in a particular region that simply lowered the average, but perhaps all of this suggests that a systemic collapse in China like that of the Soviet Union wouldn't actually be catastrophic on a global scale but of course that could be naive because there are big differences between China and the Soviet Union.

The first is simply the size. When the USSR collapsed, it had a total output of around $1.6 trillion, according to the best figures that could be obtained. according to the World Bank at that time it represented about seven percent of total world production, which was 23.8 trillion dollars, today China has a GDP of 17.8 trillion dollars again, according to the best figures it could obtain the World Bank, which is approximately 18.5 percent. of total global economic output of $96 trillion, if we go from the raw numbers, a similar proportional drop would mean the effect of China's collapse would be 2.5 times worse, meaning the global economy would take a hit. about as big as the covert pandemic, but that just goes off the raw numbers, which is probably silly to begin with, global economic growth currently is not as strong as it was in the 1980s and 1990s, it's about half a point smaller percentage on average, remember an important reason why the applause of the USSR did not result in negative global growth figures was due to the growth of countries like China, today there are no such massive rising economies to reinforce the global figures average, what is more, when the Soviet Union was divided into its constituent States.

Actually, some members didn't do so bad. Germany, for example, was already in the process of economic reunification with West Germany and actually benefited from becoming one with what was at the time the third largest economy in the world. So, of course, there is The biggest difference between the USSR and China One that I'm sure most of you have probably been thinking about all along and that is that China is much more integrated into the global economy than the US ever was. relatively isolated USSR, even to the world as a whole. It is much more interconnected than just 30 years ago;

Global supply chains, the dominance of multinational corporations, international finance, and even regular communications that span countries are much more common than in 1991. I don't want to downplay the impacts the Soviet Union had on the world, but yes. Once there was an economy that could be eliminated with little disruption from the rest of the world, it would have been one that lived behind the Iron Curtain at its peak, the USSR was responsible for less than one percent of all world trade and this was at a time when the world traded much less intensely than today China is currently responsible for 12.5 percent of total world trade according to the UN world trade is currently responsible for 52 of the world's products is now traded as Really worth It is worth understanding a percentage of total global production here because what it does is observe the value that is added to the global economy due to the trade of goods and services between countries;

That figure might not make much sense when you consider that only about 10% of the U.S. economy's output comes from exports—trade is simply one component of production along with consumer investment and government spending—but these two figures actually measure different things, there are many goods and services that make up economies globally like China and US imports and exports that make the world a richer place, but they are not actually consumed domestically, so they do not count for domestic GDP figures, but yes for global GDP figures. In reality, there are countries like Belgium where trade represents 169 of their total.

The GDP is good and even places like Hong Kong where trade accounts for 403 of their total output, this is because places like Hong Kong act as intermediaries and accommodate a lot of international trade and services that enrich others countries but Hong Kong does not use them. In itself, global trade is now a percentage of global production, it is actually below its historical peak which occurred in 2007, when trade represented 61% of global production. The decline in subsequent years was caused by the GFC and, among other things, the gradual decline since then has been. The main cause was that China developed its domestic market and became less reliant on simply being a cheap place to produce things and then ship them abroad. .

So, of course, the most recent sharp drop was caused by a covert, global bank that has not yet produced figures for 2021 or 2022, but the general expectation is that it should recover around 55 percent regardless of this decline, even at 52 percent of total world production, if 12 and a half percent of that disappeared overnight and was not quicklyreplaced by other countries or any regime. takes power in China, then this theoretical total collapse would single-handedly plunge the world into the biggest economic recession in recorded history. Of course, despite what the headlines and clickbait thumbnails might lead you to believe, it is incredibly unlikely that China's economy will completely collapse in the immediate future.

To be fair, they have some pretty serious problems, but it's also important to consider that the industries that deal most with a global economy, such as those that provide international services, import raw materials, and export manufactured goods, will be the most resilient to internal threats. turmoil simply because they depend more on the global economy than on the Chinese national economy. An extremely small scale example of this would be someone like me. I run a company that offers a video creation service that explains economics. This service is mainly exported. to viewers around the world and yes, a service like entertainment or education is counted as an export if it is consumed in a country other than the one it is manufactured in, if Australia's economy were to completely collapse tomorrow there is no reason why do not continue. making videos because I could still make money exporting my work to viewers and economies that still function.

This assumes that the economic collapse is not so extreme that I would not have access to electricity on the Internet, but if that were to

happen

, then I could simply move my business and continue my operations in another country and the world would not have to do without the value it provides this service, which well, this example made me sound incredibly arrogant and conceited, but you get the idea. Of course, a move like this on the scale of the companies we're talking about in China would cause massive disruptions in the short term, but also if we talk about a situation where China's power grid has gone offline then the world would probably have bigger problems than just an economic recession, ultimately the very fact that we are dependent on China gives its economy a level of strength which means it is unlikely to stop contributing to the global economy, there are potential situations such as an invasion of Taiwan that could lead to a Russian-style collapse. sanctions that could isolate it from the world quickly and severely, but barring that, any kind of economic collapse specifically within China is likely to occur on a long time scale that would give the industry enough time to establish operations in an alternative economy, something just like they're doing right now, sorry, not the exciting answer you might have hoped for, but exploring extreme economic situations can be really cool thought experiments to learn about things like the economic interdependence of global trade and even how our world has evolved to become a much richer, though potentially more delicate, system over the past three decades.

Thanks for watching, friend, bye.