onsdag 29. desember 2021

From economic miracle to mirage – will China’s GDP ever overtake the US?

“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 over 13%, while America’s halved to 4.5%. That pushed China’s GDP up from 5% of American GDP to 66%.