There are economic projections showing that China will pass the U.S. in 2027. Well, I’m here to tell you that it will never happen.
Let’s ignore all of China’s internal problems for now. Let’s ignore the fact that China is inefficiently allocating capital and creating one big bubble that is about to burst. No, China has another fatal problem. It must maintain a reasonable amount of growth, around 8%, year in and year out lest the populus become unhappy.
When your economy is not able to take the inevitable downturns that will come along from time to time, it is only a matter of time before the entire economy comes crashing down all at once. And that time is near for China.
Remember Japan in the 80s. It too was set to challenge the U.S. Then the real estate and stock market bubbles burst, and now no one thinks about Japan overtaking the U.S. anymore.
All the debate in Beijing about trading relationships, climate change, human rights, intellectual property and so on – the whole caboodle – has to be seen in this context. For the time being the Chinese economy remains much smaller than that of the US. But soon it won’t be. China knows that, and more thoughtful people in the West know it too. But in the US, and also Europe, we have hardly begun to think through the consequences of this shift of power: not just what it will mean for geopolitics or economics but also what it will for our whole western societies. It is such a breathtaking transition that the reaction of many people will be one of denial; that it can’t happen. So perhaps the first question to be tackled is whether China’s advance really is durable or whether there will be some bump that will deflect its course.
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