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Tags: china | economy

Has China's Economic Miracle Peaked?

a clear globe on top of chinese currency

Jefferson Weaver By Thursday, 30 November 2023 03:06 PM EST Current | Bio | Archive

There is a school of political theorists known as “declinists” (e.g., “Debbie downers”) who share a common assumption that the United States will inevitably be displaced as the global hegemon by another power.

This view has been expressed repeatedly in academic lounges and news programs alike for decades — regardless of whether the would-be upstart was the Soviet Union in the 1960s and 1970s or Japan in the 1980s or 1990s or China in the 2010s and 2020s.

The preeminent status of the United States is admittedly not guaranteed because our fearless leaders have displayed far more talent for exploding the national debt than strengthening the nation’s economic or military capabilities.

Fortunately, the chief rivals of the United States — whether they be Russia or China — are run by overlords who are also capable of making enormously stupid policy decisions that avoid the delays inherent in the decision-making processes of most democratic governments so that they can be implemented more quickly and with even more disastrous results:

Russia invaded Ukraine in 2022 and incurred ruinous worldwide sanctions while also driving Sweden and Finland into the arms of NATO and convincing an increasingly-assertive EU to seek to expand its membership eastward to both Ukraine and Moldavia. China, for its part, has engaged in staggering human rights violations, picked fights with nearly all of its neighbors including India, Vietnam and the Philippines, claimed control of much of the South China Sea and caused nearly all of its major trading partners to begin shifting their supply chains elsewhere.

But there are legitimate questions to be asked about the repeated failures of would-be successors to claim the crown presently held by the United States. Why did the former Soviet Union — which boasted a larger land mass and population than the United States — fail to catch its rival?

Indeed, the growth of the Russian economy in the past few decades following the breakup of the Soviet Union in 1991 has not given our declinists friends anything to get excited about. In 1997, for example, the GDP of Russia was equal to $433.7 billion; this GDP increased to $2.244 trillion by 2022 — a four-fold increase of $1.81 trillion during that time.

Although this represents an enormous increase at first glance, the base GDP value was extremely low after having been as high as $2.5 trillion in 1989. Indeed, the GDP of the United States in 2022 was still more than 14 times the size of that of Russia.

Of course, this simple comparison does not provide the entire story because the Soviet Union in 1990 boasted a population of nearly 287 million persons and a land area of 8.65 million square miles. After the collapse of the Soviet Union, its biggest constituent republic, Russia, was left with about 148 million inhabitants and 6.601 milion square miles.

No doubt the loss of nearly half its population, a quarter of its territory and much of its industrial base was undoubtedly traumatic to the Russian nation. But there are few features of the Russian economy — which has been described as a gas station with nuclear weapons — that would cause any sane person to believe that it will become a serious threat to the economic preeminence of the United States in the next century.

Similarly, why did the industrial colossus that was Japan during the last couple of decades of the 20th century fumble its opportunity to seize control of the global stage?

Japan became bogged down in a 30-year malaise accompanied by a declining population that the World Bank estimated shrank from 125.5 million in 1995 to 125.1 million in 2022 that saw its GDP — according to Statistica — actually shrink from $5.545 trillion in 1995 to $4.237 billion in 2022 — a decline of $1.308 trillion.

During that same time period, the GDP of the United States rose from $7.639 trillion in 1995 to $25.461 trillion in 2022 — an increase of $17.822 trillion. This increase in America’s GDP was accompanied by a rise in population from 266.6 million in 1996 to 333.3 million in 2022.

The trends provide an eye-opening view of two economies heading in opposite directions: In 1995, the Japanese GDP was nearly 73% of that of the United States whereas by 2022 the Japanese GDP had shrunken to only about 16.6% that of the United States.

Of greater relevance today is whether China — boasting a population more than four times that of the United States and an economy that grew at double-digit rates for three decades to become the world’s second largest economy in 2015 — will buck this trend and push the United States off the top of the global pedestal. Or will it suffer the same fate as the Soviet Union and Japan before it and fade away before it can claim the hegemon mantle from the United States?

After all, its population of about 1.411 billion people in 2022 is projected by Brookings to decline precipitously to below 1 billion people by 2080 and below 800 million by the end of the century.

Dr. Yi Fuxian of the University of Wisconsin-Madison has studied the rise and fall of America’s would-be rivals and attributes this country’s ability to remain astride the world’s economic stage to the fact that the United States is the only country of the four whose population has continued to increase decade after decade.

Meanwhile the demographic fortunes of each of its would-be rivals have risen and fallen over time due to the aging of their respective populations and the falling ratios of workers to the population as a whole. He also expects that China’s aging population will rapidly decline for the rest of the century due to the lingering effects of its disastrous One-Child Policy and cause an enormous contraction in its GDP that will see “a widening economic divide between a rapidly aging China and a largely middle aged US.”

He suggests that by 2031, China will lag behind America in every demographic metric and its GDP growth rate will likely fall below that of the United States.

The days of “Peak China” may have passed due to the unavoidable trap of a rapidly declining worker population and an economy that can no longer count on massive influxes of workers from the countryside.

Indeed, China’s falling population will necessarily result in a shrinking consumer class that will purchase fewer and fewer goods and services in the ensuring decades, thus sealing its fate as a declining power and ending its ambitions to displace the United States as the preeminent economic power.

Jefferson Hane Weaver is a transactional lawyer residing in Florida. He received his undergraduate degree in Economics and Political Science from the University of North Carolina and his J.D. and Ph.D. in International Relations from Columbia University. Dr. Weaver is the author of numerous books on varied compelling subjects. Read more of his reports — Here.

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There is a school of political theorists known as "declinists" (e.g., "Debbie downers") who share a common assumption that the United States will inevitably be displaced as the global hegemon by another power. This view has been expressed repeatedly in academic lounges and...
china, economy
Thursday, 30 November 2023 03:06 PM
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