It is common for politicians and pundit types to speculate on when or whether China’s economy will pass the US economy as the world’s largest. The latest episode to cross my path was a column by David Wallace in the New York Times.
There is little reason for this sort of speculation. China is already the world’s largest economy, its economy is more than 20 percent larger than the US economy, according to the IMF. Furthermore, it is growing considerably more rapidly (assuming they don’t continue their zero COVID-19 policy forever), so it is projected to be more than a third larger than the US economy by the end of the decade....
Of course, the story is different in terms of per capita wealth and income. The Chinese economy is larger than the US economy largely for the reason that China has been playing catch-up and its population is several times as large the US population so even with modest output the economy is greater. China's aim now is to equal and eventually surpass the West in distributed prosperity through a socio-economic system that China regards as superior to the West's. But on a global scale, China is still a relatively poor country over all, with still a significant rural peasantry.
Real-World Economics Review BlogChina is the world’s largest economy: Get over it
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C
2 comments:
And Russia is a primary resource exporter - just like Canada.
Larger economies dominate smaller ones.
The amount of commerce is proportional to market size.
Washington sees this as a zero sum game and in terms of geopolitical power, they are correct.
China will exploit their weaker trading partners. Their socio-economic system is the same as the west's - a mixed economy. Outdated ideology from the past doesn't affect how the world works.
China's aim now is to equal and eventually surpass the West in distributed prosperity through a socio-economic system that China regards as superior to the West's.
China's growth rate tells us nothing about China's economic model. What we are seeing in China is Solow catch-up growth, adding capital and copying the innovations of other economies, in the same way that Germany and Japan grew rapidly after the destruction of their capital stock during WWII. In point of fact, what China's growth shows us is the growth of capitalist economies, compressed over a very short time period. If and only if China reaches the Production Possibilities Frontier (PPF), will we know if China's economic model is capable of innovation.
As for distributed prosperity, China is not there yet.
China has by far the lowest consumption share of GDP of any economy in the world.
There’s no mystery as to why the Chinese consumption share of GDP is so low. Chinese households retain a very low share—in the form of salaries and wages, other income, and transfers—of what they produce, so they are unable to consume more than a low share of what they produce. Beijing’s new common prosperity policies focus on redistributing income from the wealthy to the poor and the middle class, but even if the program is successful, this will only help at the margins. —Michael Pettis (professor of finance at Peking University’s Guanghua School of Management)
source: The Only Five Paths China’s Economy Can Follow
As Pettis notes elsewhere, "dual circulation" is an attempt by China's government to increase the consumption share of GDP, but this is proving extremely difficult.
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