Has China's economic miracle peaked?

[Compiled and published by New Sancai] There is a school of political theorists, namely "decline theorists". They share a common assumption that the United States' global hegemony will inevitably be replaced by another great power.

This view has been expressed repeatedly in academic lounges and news programs for decades—whether the future upstart is the Soviet Union (in the 1960s and 1970s), Japan (in the 1980s or 1990s), or China in the 2010s and 2020s.

To be sure, America's preeminence is not necessarily guaranteed, as our fearless leaders are clearly no match for their ability to squander government budgets in strengthening the nation's economic or military capabilities.

Fortunately, America's main competitors—whether Russia or China—are governed by hegemons who are also capable of making egregiously stupid policy decisions and avoiding the delays inherent in the decision-making process of most democratic governments. They can be implemented faster, but the results can be more disastrous.

Russia's invasion of Ukraine in 2022, which incited devastating global sanctions while also pushing Sweden and Finland into the arms of NATO, persuaded an increasingly assertive EU to seek to expand its membership to include Ukraine and Moldova.

For its part, China has committed egregious human rights abuses and is at loggerheads with nearly all of its neighbors, including India, Vietnam and the Philippines.

It also claims control of much of the South China Sea, causing nearly all major trading partners to begin moving supply chains elsewhere.

But there are some legitimate questions to ask about the repeated failure of potential successors to seize the throne currently held by the United States.

Why did the former Soviet Union, which had a larger land area and population than the United States, fail to catch up with its rival?

In fact, the growth of the Russian economy over the past few decades, since the collapse of the Soviet Union in 1991, has given our declinist friends nothing to be excited about.

Taking 1997 as an example, Russia's GDP was US$433.7 billion; by 2022, GDP increased to US$2.244 trillion—a fourfold increase over the same period, or an increase of US$1.81 trillion.

Although this may appear to be a huge increase at first glance, the underlying value of GDP is very low compared with its peak of $2.5 trillion in 1989. In fact, the GDP of the United States in 2022 will still be more than 14 times that of Russia.

Of course, this simple comparison doesn't tell the whole story, as the Soviet Union in 1990 had a population of nearly 287 million people and a land area of ​​8,650,000 square miles.

After the collapse of the Soviet Union, only about 148 million residents and 6,601,000 square miles of land remained in its largest constituent republic, Russia.

There is no doubt that losing nearly half of its population, a quarter of its territory, and much of its industrial base was traumatic for the Russian nation.

But there are few characteristics of the Russian economy—described as a nuclear-armed gas station—that would lead any reasonable person to believe that it will pose a serious threat to U.S. economic dominance over the next century.

Likewise, why did Japan, the industrial giant of the last decades of the 20th century, miss its chance to dominate the global stage?

Japan is stuck in a 30-year slump with a shrinking population. The World Bank estimates the population will fall from 125.5 million in 1995 to 125.1 million in 2022. According to Statistica, Japan's GDP will actually decrease from $5.545 trillion in 1995 to 2022. US$4.237 trillion in 2017 – a decrease of US$1.308 trillion.

During the same period, the GDP of the United States grew from US$7.639 trillion in 1995 to US$25.461 trillion in 2022, an increase of US$17.822 trillion.

The growth of U.S. GDP has been accompanied by an increase in population from 266.6 million people in 1996 to 333.3 million people in 2022.

These trends are eye-opening, and the two economies are moving in opposite directions: in 1995, Japan's GDP was almost 73% of that of the United States, but by 2022, Japan's GDP has shrunk to only about 16.6% of that of the United States.

Today, what matters more is whether China—with a population more than four times that of the United States, an economy that has grown at double-digit rates for three decades in a row, and became the world’s second-largest economy in 2015—will buck the trend. OK, promote economic development and pull the United States from its position as a global hegemon? Or will it repeat the mistakes of the former Soviet Union and Japan and be eclipsed before the United States can seize hegemony?

After all, the Brookings Institution predicts that China's population will be about 1.411 billion in 2022, will drop sharply to less than 1 billion by 2080, and will drop to less than 800 million by the end of the century.

Dr. Yi Fuxian of the University of Wisconsin-Madison has studied the rise and fall of potential U.S. rivals and attributes the United States' ability to maintain its position on the global economic stage to being the only one of the four countries with a population that has continued to decline for decades. increase.

At the same time, the demographic fortunes of each potential competitor rise or fall over time due to the aging of their respective populations and the declining share of workers in the overall population.

He also predicts that China's aging population will decline rapidly over the rest of the century due to the lingering effects of the disastrous one-child policy. This will lead to a sharp contraction in gross domestic product and "a widening economic gap between a rapidly aging China and a largely middle-aged United States."

He believes that by 2031, China will lag behind the United States in all demographic indicators, and its GDP growth rate may also be lower than that of the United States. The era of "Peak China" may be over, as a rapidly declining worker population and an economy that can no longer rely on an influx of rural workers are inevitable pitfalls.

In fact, China's declining population will inevitably lead to a shrinking consumer class that will buy fewer goods and services in the coming decades, thus dooming it as a declining power and ending its ambition to replace the United States as the preeminent economic power.

(Author: Jefferson Hane Weaver is a transactional attorney living in Florida. He received his BA in Economics and Political Science from the University of North Carolina and his J.D. from the University of California and Ph.D.)

(Compiled by: Wang Jimin)

(Editor: Jiang Qiming)

(Source of the article: First published by Xinsancai)