Will China Overtake the U.S.?

There is no guarantee that China’s economy will surpass the U.S. according to Cary Huang of SCMP (21 April 2019). The perception that China is the No.2 global power and is on the road to being No.1 is based on two questionable assumptions – China’s growth rates will continue and the size of its economy equates to national power.

China’s official GDP (in 2018) was USD 13 trillion, which is about two-thirds of U.S.’s USD 20.9 trillion economy. So based on growth rates over past decade, some economists forecast China’s GDP will overtake the U.S. by 2030 or sooner. The grand assumption is growth rates will continue in the present fashion. But China’s growth momentum has been slowing down since 2007 when it peaked at 14.23 per cent. There is a downward spiral as its base is now much bigger. With China switching to a consumption mode, its economy is anticipated to slow down substantially.

Next, is the question of size of the economy and national power. Even if China’s economy surpasses the U.S., it does not follow China will be economically powerful or wealthy as Americans. In China’s case, it has overcapacity and bad debts, producing what is termed “bad” GDP. A more meaningful measure is perhaps GDP per capita, and China’s GDP per capita was USD 9,400 in 2018. This pales compared to U.S. GDP per capita of USD 53,712. China’s GDP per capita is also below the world average of USD 11,570 in 2018. So it is still seen as a middle-low income country.

  

A nation’s power is not limited to its economic size but about productivity, innovation, technology and management skills. It’s about military, diplomatic, scientific, educational, cultural and the arts. So it cannot dictate the world’s rules since its primary stage of socialism has not evolved into greater human rights and respect of the individual. Alas, Trump (and his cronies) have regressed into a less liberal mode on U.S. traditional celebration of diversity. This now endangers U.S.’s lead on innovation and technology in the near term.

So will China overtake the U.S.? Yes, in nominal GDP terms or on purchasing power parity basis but not in terms of per capita basis for a long while yet.

Reference:

If China thinks it’s overtaking the US any time soon, here’s a wake-up call, SCMP, 21 April 2019

Silicon Valley Can Still Beat China, Bloomberg, 14 July 2019

China will overtake the U.S. as world’s top economy in 2020, says Standard Chartered Bank, Big Think, 14 January 2019