Results from various global polls show otherwise.today still is the undisputed world champion
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Results from various global polls show otherwise.today still is the undisputed world champion
Hundreds of reports have different predictions of the date of China's overtaking
From economic miracle to mirage – will China’s GDP ever overtake the US?
Analysis: issues of governance, rising debt, Covid and property market turmoil will delay Beijing’s quest to become the global economy’s No 1
A vast car park of lorries and excavators for export at the port of Lianyungang in China’s Jiangsu province. Photograph: VCG/Getty Images
George Magnus
Tue 28 Dec 2021 15.08 GMT
“The east is rising, the west is declining”, according to the narrative propagated by the Chinese Communist party (CCP). Many outside China take its “inevitable rise” as read. On the way to becoming a “modern socialist country” by 2035, and rich, powerful, and dominant by 2049, the centenary of the People’s Republic, China wants to claim bragging rights as its GDP surpasses the United States, and project its power based on its expanding economic heft.
There is, however, a critical flaw in this narrative. China’s economy may fail to overtake the US as it succumbs to the proverbial middle-income trap. This is where the relative development progress of countries in relation to richer nations stalls, and is normally characterised by difficult economic adjustment and often by unpredictable political consequences.
Historically, China’s growth miracle has been remarkable. In the 30 years to 1990, the money GDP (the market value of goods and services produced in an economy) for China and the US in American dollar terms grew more or less in tandem at just over 6% and 8% per annum, respectively. . But in the next three decades, China’s GDP growth doubled to more than 13%, while the US’s halved to 4.5%. That pushed China’s GDP up from 5% of American GDP to 66%.
Yet, China’s growth spurt is now over, and the huge disparity in GDP growth has been eliminated. In the last few quarters, China’s GDP has been growing at half the rate of the US. Although that discrepancy is probably unsustainable, the US’s estimated $7tn GDP margin over China in 2021 means that comparable rates of GDP growth in the future will sustain and even widen the margin. A Japanese thinktank has recently extended the date when it expects China to overtake the US, from 2029 to 2033. Deferrals like this are now a feature, and there will be more.
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The issue though is less about the maths and more about why China is at a turning point.
Remember we have been here before. In the 1930s, Germany was going to dominate Europe, if not the world. In the 1960s and the 1980s, the Soviet Union – which had already stolen a march on the US in space technology – and later Japan, which was the rising economic force on the planet, would within 10 to 20 years overtake the United States to become the dominant economic and technological power.
History was not kind to the consensus. There is a serial tendency going back to the 1920s to underestimate the self-rectifying capacity of American institutions and enterprise. Equally, the Soviet Union and Japan both pursued similar development models, based around distortions that emphasised unsustainably and excessively high savings, high investment, and eventually high debt. Their development models cracked with spectacular consequences attributable to chronic failures of institutions and governance.
China is our 21st-century version of this phenomenon. Its investment rate is a good 10 percentage points of GDP higher than it was at the peak in the USSR and Japan, and strongly associated with misallocation and inefficiency of capital, and widespread debt servicing problems.
Its zero-Covid policy could keep barriers in place between China and the world economy until 2023 or even beyond, but this aside, a protracted slowing in trend growth, exacerbated by over-indebtedness and the tipping point now in real estate, as illustrated by the crumbling development giant Evergrande, is already under way. China’s $60tn real estate sector is four times GDP and accounts for a quarter to a third of annual growth. It faces years of awkward adjustment, not least as developers cut debt, the first-time buyer age cohort contracts, and probably as real estate prices decline.
China’s economic structure, moreover, is unbalanced. It has income per head that is the equivalent of Mexico, but consumption per head that is no higher than Peru. Consumer spending accounts for about 37% of GDP, little higher than it was in 2010, and much lower than in 2000. Productivity growth, closely associated with liberalising reform, has stalled.
End to China’s estate market boom could spell trouble for the economy
George Magnus
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China’s development model urgently needs a makeover to avoid the middle-income trap. The longer it is delayed, the bigger the costs. China’s leaders recognise that change is necessary, and Xi Jinping recently revived the slogan of “common prosperity” to mobilise the Communist party and citizens around a strategy to reduce income and regional inequality, and improve living standards.
Yet these political goals require precisely the kind of liberalising, progressive and redistributive reforms to the economy to which Xi Jinping is opposed. He has pursued an increasingly ideological and totalitarian governance style in which the already dominant position of the party and state in the economy has been strengthened further.
Perversely, he has created a contradiction in which even the CCP’s expertise in dialectical argument may be of little help. The recent blizzard of new laws and regulations aimed at private firms and entrepreneurs, for example, is designed to nail down the party’s control and bring the private sector to political heel. This is hardly compatible with the productivity growth and innovation on which China’s lofty economic ambition depends.
Overtaking the United States is going to need a lot more than narrative. It requires policies to which Xi’s China is opposed, and might just remain a mirage. The consequences for China and the rest of the world have not been properly thought about.
George Magnus is a research associate at Oxford University’s China Centre and at Soas. He is the author of Red Flags: Why Xi’s China is in Jeopardy.
From economic miracle to mirage – will China’s GDP ever overtake the US?
Analysis: issues of governance, rising debt, Covid and property market turmoil will delay Beijing’s quest to become the global economy’s No 1www.theguardian.com
It's falsely instilled fear by US and the west, they also claim that China is about to invade every neighbor, but the fact is China didn't fire a single shot to any countries for 40 years , speaking of a warlike and threatening country, check the track record of US for the past 2 decades or more.Whose position is justified? The whole reason NATO continues to expand is due to Russia, just few weeks ago Russia began threatening Sweden and Finland and now those countries are seriously considering joining NATO, if Russia was a peaceful neighbor NATO would serve no purpose, it is entirely on Russia that countries such as Ukraine, Georgia and many others are attempting to join the union.
for some reason all our MIT students all look Chinese I just cant figure that out while they get 2nd place in the ICPC contests right behind russia, with china 3rd place and poland 4th place. For some reason as well all our top math and science students all look Chinese as well. I mean how does that all happen?The US is already present and engaged worldwide, back when your China is still a backwater hellhole. it today still is the undisputed world champion while you're struggling to pass their GDP while being 4x larger.
So yeah, maybe you could sell your idea to whatever hole you came from.
yes, correct all the brightest talents ended up in the US, including from Russia.for some reason all our MIT students all look Chinese I just cant figure that out while they get 2nd place in the ICPC contests right behind russia, with china 3rd place and poland 4th place. For some reason as well all our top math and science students all look Chinese as well. I mean how does that all happen?
Not in China, now over 80% of Chinese students studied in US choose to come back to China, besides, in China, most students choosing to study overseas are 高考失败者, whose who failed Chinese Gaokao, so they are not really talents in the first place.yes, correct all the brightest talents ended up in the US, including from Russia.
Hence no wonder why the US will rule the world for centuries to come.
China's goal is not for seeking the global domination, but for ending the white western global domination and colonisation which has ravaged this planet for centuries.Hence no wonder why the US will rule the world for centuries to come.
Tibet was part of China long before PRC, check the old world map and find out.Yeah, right says the colonizers of Tibet
True, so was Russia and most countries in between. and back then your America was not even a country.China was once part of the Mongol empire
We all know who invaded and conquered countries around the world, check out the world map, if you insist it was China, be my guest.yes, that why we have Int'l law, something that rogue country like yours don't respect