When will China’s economy overtake that of the United States in aggregate terms? A recent Bloomberg article estimated point of the overtaking of the United States by China between 2031 and “never”. The size and growth of China’s economy has immense global implications, and it’s worth taking some time to analyze our beliefs about Chinese growth and its international consequences.
As most know, China already has a larger GDP than the United States in adjusted purchasing power parity (PPP) numbers, but it continues to lag behind in nominal terms. The size of the Chinese economy is absolutely essential for thinking about the future of competition between China and the United States. Of course, China already offers a more powerful economic power than any competitor the United States has faced since the late 19th century.
We also get a good idea of the problems China faces: excessive private sector debt, underperforming state-owned enterprises, an economy dependent on (seemingly precarious) overseas exports and, most alarmingly of all, a huge demographic cliff. The Bloomberg study examines all of these, noting that China will need to put in place reforms that increase labor availability (either by increasing birth rates or extending workers’ careers), whether its infrastructure is too expensive and underperforming from the point of view of efficiency, and that the individual productivity of workers must reach the levels of developed countries. China catches up with the United States in the 2030s in two of three models, based on aggressive labor market reforms and continued access to the U.S. market.
Of course, the United States faces challenges in the same areas as China, which will necessarily affect all long-term projections. Birth rates in the United States have declined in the wake of the pandemic, and the traditional American solution of openness to immigration has become increasingly difficult in political terms. While China may have overinvested in social capital and infrastructure, the United States continues to chronically underinvest due to the political impasse. The United States therefore has considerable work to do to maintain its competitiveness. It’s also probably worth thinking about how and what the United States could do to curb Chinese economic growth, including aggressive decoupling and the strict use of financial and technological sanctions.
We have to be careful in interpreting raw numbers like fate; as Gideon Rachman notes, China has not yet fully embrace the idea to become a world superpower, just as it still has to (for example) measure the difficulty of maintaining and modernizing the immense navy it has built. It should also be noted that many economists in the 1950s and 1960s believed that the Soviet economy was doomed to overtake that of the United States. Yet Chinese economic growth has been the dominant feature of international relations in the 21st century and will continue to shape world politics for the remainder of the century.