Seldom a day goes by where we are not treated to a book or an article or an interview whereby an expert (or well-informed celebrity) offers his or her opinion about China's growing economic power. Many will then offer a less than flattering prognosis for the future of the United States, viewing this nation as a hopelessly divided, declining superpower that continues to have grand delusions about its hegemonic role in the international system.
This narrative is not new as one could swap out China in the 21st century for the Soviet Union in the 1960s and Japan in the 1980s to the same effect. In each case, much of the American government as well as the chattering elites in the media and the universities declared that the United States would soon cede its crown to the latest 10-foot-tall challenger.
Unfortunately for these influential and self-important prognosticators, the economic threats posed by each of these would-be pretenders to the throne never came to pass.
But this time is supposedly different because the Chinese have a population four times the size of that of the United States and boasts an economy that is the second-largest in the world, and so on and so forth. However, China has its own issues which include slowing economic growth and an aging population which may increasingly hinder its stated goal of displacing the United States in economic terms and, more broadly, remaking the international system in its own autocratic image.
Few would argue that China has made enormous strides in the past five decades. Indeed, the Chinese economy was puny in the early 1970s when President Nixon made his historic visit to Beijing; its $113 billion economy (with a per capita income of $132) was less than one-tenth the size of the $1.27 trillion economy (with a per capita income of $6,904) of the United States at that time.
Yet China's economy relative to that of the United States would grow more rapidly over the ensuing decades as it industrialized. From 1983 to 2010, China's economy grew (on average) more than 10% per year.
Unfortunately for China, that rate of growth rapidly decelerated afterward, slowing to 3% in 2022 as compared to a 2.1% rate for the United States. Even so, that sustained record of double-digit growth — fueled in large part by China's export-oriented trade policies and its new primacy as the world's leading manufacturer — enabled it to build up its GDP to $17.3 trillion by 2022 (with a per capita income of $12,516) as compared to the $25.6 trillion GDP reported by the United States (with a per capita income of $70,480).
A simple extrapolation of the respective rates of growth of the two countries over the past 50 years led many economists and policymakers to conclude that China would soon displace the United States as the world's largest economy — even though the per capita income in the United States is still nearly six times that of China's per capita income.
Yet the reports of the end of the American economy's global preeminence have been, to paraphrase Mark Twain, greatly exaggerated. China's rapid industrialization over the past five decades was made possible by it being able to count on hundreds of millions of citizens migrating from rural areas to the cities where they could work in hundreds of thousands of factories.
However, this influx of cheap labor has ended and China's labor costs are now among the highest in Asia with its manufacturing sector rapidly losing market shares to other countries such as Vietnam.
Moreover, the demand for Chinese exports has virtually collapsed, falling 40% over the past year in the United States alone.
China's demographic prospects have also changed drastically with it reporting a drop in population of 850,000 people in 2022, a development which the Shanghai Academy of Social Sciences reports could presage a massive decline in the population to less than a third of today's 1.4 billion citizens by the year 2100.
This decline could be accompanied by an inversion of the current 5:1 worker to elderly person ratio to one in which the elderly actually outnumber the working population.
In sum, all of the factors that contributed to China's economic ascendancy over the past half century have either dissipated or begun to be reversed altogether. Its torrid rate of economic growth has slowed to a crawl and could soon fall behind that of the United States.
It can no longer count on millions of new low-wage workers to join the labor force. Moreover, its increasingly-pricey working population is both shrinking and aging at the same time, a trend that will impose enormous costs on what is now a virtually non-existent social welfare system.
For all of these reasons, the United States will likely maintain its economic supremacy for the foreseeable future, despite its own mixed record in recent years of profligate spending, excessive regulation, and political rancor.
Jefferson Hane Weaver is a transactional lawyer residing in Florida. He received his undergraduate degree in Economics and Political Science from the University of North Carolina and his J.D. and Ph.D. in International Relations from Columbia University. Dr. Weaver is the author of numerous books on varied compelling subjects. Read more of his reports — Here.
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