Can China Overtake US in GDP?
How does China’s future as an economic superpower affect U.S relations? COVID and a trade war have hammered both the U.S. and Chinese economies. Can China still overtake the United States? And how bad was America's China Shock, really? Two economists from the National University of Singapore weigh in.
by Valentina Graziosi, National Press Foundation
China may no longer be on track to overtake the U.S. in GDP. Chinese leader Xi Jinping has said it is possible for China to double its total economic size, or per capita income, by 2035. Although it has long been assumed that China would inevitably surpass the United States in GDP, its ability to do so depends on Beijing’s willingness to implement extensive reforms, said Bert Hofman, Director of the East Asian Institute at Singapore National University. Both the U.S. and Chinese economies have fared poorly in the pandemic. But China lags far behind in terms of productivity, with per-worker productivity at just one-quarter that of the U.S., Hofman said. Per capita income, at $12,000 per year, also lags.
China could boost worker productivity - if it wishes. Hofman outlined several reform measures that China could take to increase productivity and GDP growth. First, it would have to deal with steep demographic headwinds, including low fertility rates and an aging population resulting from its one-child policy. But “demography is not destiny,” Hofman said. China has begun to invest in boosters of human capital, such as education, although this is slow to bear fruit. Increased investment has allowed China to catch up rapidly, despite having a large rural population whose education remains quite poor. But even more capital will be needed, Hofman’s data show.
Continued R&D investment will also be required. To overtake the United States, China will need to continue its investment in research and development. China already spends about 2.5% of GDP on R&D, a higher percentage than Europe invests, Hofman said. “That is going very much in the right direction.” Hofman says that China can continue to produce growth from more investment in both education and technology, but there are limits to that strategy without structural (human) reforms.
More expansive reforms would be needed for China to surpass US GDP. China’s infrastructure investments alone are inadequate to generate sufficient growth to overtake the United States in GDP growth, Hofman’s data show. “China has been misallocating… quite a bit of its savings,” he said. Its glut of empty apartments is a drag on the economy. “If you don’t solve bottlenecks, if you have a lot of empty apartments, in the end, it doesn’t add to productivity, doesn’t add to GDP,” he said. Growth-enhancing reforms might include extending the retirement age for women to 65; abolishing the household registration system; increasing the efficiency of the bankruptcy system; and improving the rural land system and rural education, he said. China is likely to make these changes over time, but what is critical, Hofman said, is the speed of the reforms. “The differences are not that large, but under a low (reform) scenario… Xi Jinping’s target will not be met, I can tell you. Under a comprehensive reform scenario, it will be met,” he said.
The U.S.-China trade war was costly to both sides. Sanjana Goswami, assistant professor at the University of Singapore, noted that the China Shock - the massive increase in Chinese exporting starting in 2001 - has been followed by a measurable dent from the U.S.-China trade war. Before the trade war began, about 5% of Chinese products were subject to U.S. tariffs. Now, after a series of retaliatory measures by both sides, it’s 19%. About 58% of U.S. exports are now subject to Chinese tariffs, and about 66% of Chinese exports are subject to U.S. tariffs, she said. The price increases have been fully passed on to consumers, who have no recourse, she said. “There’s no forum for consumers to ban together and say, ‘Hey, we don’t want to pay higher prices on certain products,’” she said.
Speakers: Bert Hofman, Director, East Asian Institute; Professor in Practice, Lee Kuan Yew School of Public Policy, National University of Singapore
Sanjana Goswami
Assistant Professor, Lee Kuan Yew School of Public Policy, National University of Singapore
Takeaways, transcript and resources: nationalpress.org/topic/china...
National Press Foundation’s International Trade Fellowship in Singapore is sponsored by the Hinrich Foundation. NPF is solely responsible for the content.
Пікірлер: 12
My personal take on this presentation, Although any and all discussions are important to better facilitate the exchange of ideas and understand a topic particularly as complex as this chosen topic, There is much I find here that's not founded on solid understanding. I don't find much to disagree with the information provided by Lee Kuan (the first speaker) But I unfortunately find a lot to criticize about the presentation by Bert Hoffman. My big problem with his material is that it's nearly all based on macroeconomic data without IMO properly accounting for the sociological, technological and legal aspects and implications of his opinions. It's possible to perform analysis based solely on data, but I feel uneasy about analysis that isn't informed by how and why the numbers are what they are. To me, numbers are only representations of the various complex activities in a society, and today's advancements are primarily affected by the society's technological level of advancement and the legal and societal processes and institutions that govern how people interact with each other and utilize their capabilities. Following are some specifics to illustrate what I find lacking... 30:54 Is China's investment really efficient? China's problems especially the last couple decades has been high goals that are unrealistic, so plenty of investment is wasted. Also, investments don't always make business sense, eg foreign BRI often results in non-performing payments and defaults, domestic BRI has resulted in wasteful projects like HSR which can be justified by non-business benefits but was built at major cost and continues to be a continuous operating loss, draining resources. 32:05 Amount of money spent on R&D does not measure results and return, so is misleading. The central CCP is recognizing this, so current 5 year plan sets lower, more attainable and realistic goals compared to previous 5 year plans which have wasted trillions of dollars worth of failures like failed semiconductor fabs. 33:30 Comment about China's lack of use of R&D is probably not entirely accurate. China's successful companies demonstrate particularly good use of applied technologies, have often taken Western concepts and improved on them. IMO China's main problem is lack of knowledge in foundation intellectual property. The CCP has thought that simply setting ]every academic institution requirements for patent applications would solve this problem, but all we're seeing to date is a mountain of patent applications but no one knowing how to use any of the IP. Is that really because China China chooses or ignores using the IP or is it because IP isn't well understood or incentives exist to do something with the IP? 34:04 Unrealistic to propose Chinese reforms because all reforms rely on a society and institutions that are based on Rule of Law. The CCP may never consider any of the proposed reforms because each refers to a legal process and institutions that enforce law, guidelines and norms plus introduce antithetical concepts to CCP rule like private ownership, private capital and private investment. In China, the CCP owns everything and any concepts of private ownership, individual rights are illusory. Nothing including businesses, property of any type can be refused if the CCP wants it or if anything is requested regardless of existing laws, agreements or perceived rights. Like any other authoritarian state, laws only get in the way of demands by those who rule. One has to realize that China's brand of capitalism is to allow people to work hard and think they're acquiring personal assets but the CCP always retains the right to take it all away by edict if "requested." Size, success and power are not enough to resist the CCP, as the founder of the Ali companies and Ant Group Jack Ma has come to realize. 39:25 The price of decoupling. Should realize that China has voluntarily been decoupling for many years and is not primarily driven by external forces like the Trump trade wars. China has always banned foreign ownership of Chinese businesses and assets and foreign capital in all forms was always discouraged. It's just that China has largely ignored foreign capital persistence to lend and invest in China as long as there was no real obligation for China to perform and anything outside of China like ETFs were frowned upon but until recently was considered just games foreigners might play but wouldn't affect what happens in China. China has always wanted a transactional relationship with the rest of the world and distrusted any foreign activities on Chinese soil. The comment towards the end of this segment about China becoming more self-sufficient and capable is not entirely accurate, especially in conjunction with IP sanctions, Chinese progress in numerous essential areas now has to be entirely on its own and often run into IP rights which means instead of China utilizing commonly used IP, must discover and invent new IP or suffer further sanctions The US specifically accused China of systematically stealing and coercing to acquire IP and that has been cut off for now. 44:00 I don't know if it's only inadequate choice of words, but there's plenty wrong about what was said about China's disproportionate wealth concentrated in housing. IMO that is not the problem as much as it's the permissive lack of regulation of housing standards that result in uninhabitable dwellings, lack of regulations that govern what types of housing is built and where. It should not be forgotten that despite the overbuilding of useless housing there is still a housing crisis in China because less than 1/3 of the population has been touched by China's economic development over the past 50 years. More than half the population still lives a 3rd world agrarian lifestyle of bare subsistence, If China's exuberant RE Development was redirected to building useful and needed housing instead of useless and uninhabited dwellings that many have no intention of living in anyway, China's overall society and economy could greatly benefit. Bottom line is that to answer the topic of this presentation, IMO China may overtake the US in GDP but that is only because of how GDP is calculated which includes investments which are like empty calories in an economy. Investment which is placing capital in instruments like Real Estate, stocks and bonds are essential to form wealth in every economy but that is only to then divert a portion to new business formation, employment and the production of real goods and services. Investment by itself does not directly produce goods and services and as long as money remains in its "investment state" society and the economy does not really improve. I'm not alone in recognizing that China's approx 29% of annual GDP is RE Development (not counting all other investments!) is very unhealthy, the CCP has also realized this across at least the previous and the current 5 year plan. For comparison, besides approx 1 1/2 times the total size of China's annual GDP, the US annual US GDP has only about 6% total investments, everything else is largely the production of goods and services. The CCP is taking steps to destroy parts of its "virtual economy"(likely unnecessary) and directing its people to instead transition to a "physical economy." This is because the CCP themselves recognize that their current path does not put them on a path to overtaking and then surpassing the US economy. Already today, in terms of wealth China is the #1 global economy but has resulted in deficiencies in critical technologies like fanjet engines which are essential to a domestic aircraft manufacturing industry, nuclear propulsion, and leadership in numerous medical and technical industries which show up in other ways like not having an adequate Covid vaccine that allows reopening the economy without lockdowns. China's future in large part is at a crossroads today. The CCP is attempting to force the national economy in a radically new direction, causing massive disruption but maybe this is the best time for that to happen since the economy is still partly in Covid lockdowns and energy shortages anyway. 2021 was a disastrous year suffering the effects of numerous self-inflicted disruptions and catastrophes due to bad decisions but was further exacerbated by natural catastrophes some of which continue into 2022, so 2022 is shaping up to be worse than even 2021 was. It should not be forgotten that today is still very far off from China's stated goals for 2046-2049 so there is still plenty of time for China to fix what is broken today and put itself back on a trajectory to challenge the US, but the short term outlook is a lot of pain
@atulkatariya4286
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wow man awesome :0
@AFTR2025
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The USA is the #1 global economy in terms of wealth. Look up the countries by national net wealth, the USA comes in first. The McKinsey report was proven false by many sources, so I’d suggest you edit your comment slightly
@AFTR2025
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USA is the #1 global economy in terms of net worth/wealth, please don’t misinform readers.
@AFTR2025
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The USA has the largest economy in the world.
@AFTR2025
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The USA has the largest national net worth in the world, making the USA the #1 global economy in terms of wealth and the richest country overall.
Yes maybe in the year 3000
This question is ridiculous
Actually the US is 20 trillion and India not even 5 trillion 😒😒😒😒