Updated: Jan 13, 2022
China has rapidly transformed from a country with nearly 80% of its people living in poverty to a nation with the second-largest economy. It has averaged its economic growth at 10%. Estimates suggest that China’s GDP would surpass that of the US by 2028. It has already surpassed the US in terms of Purchasing power parity. But will it be able to get to the position of No.1 in the world? The answer clearly seems NO.
Projected GDP growth rate
Today China is the world’s factory. Most of the goods are manufactured in China. China has higher levels of adjusted GDP than the US, higher levels of Investments, a higher rate of trade flows, and a higher growth rate. Does this mean that China is all set to be the No.1 and the US’s time of being the Global Leader are over? NO!! Let’s analyze why?
Things are always not what they seem. Predictions depend on the way people look at the data. China may surpass the US in terms of GDP but, there is a catch. GDP is not always the sole representative of a country’s economy.
The truth is that the US is far richer than China, and in fact, this gap, instead of narrowing is actually widening over the years. Yes, you read it right, there is a growing gap between the US and China. GDP is a gross indicator and doesn’t measure factors like wealth creation and the ability to be a Superpower. The real question is can it afford to be the global leader?
Since the year 2000, the percentage of millionaires relative to the population as a whole has increased by only 0.5 percentage in China, whereas in the US the increase has been ten times greater. And today nearly 9% of American Adults have a net worth of more than 1 million dollars. In fact, the wealth gap between China and the US has widened by over 12 trillion dollars since 2011. But how is this possible? China has an economy based on manufacturing. Well, China is the factory of the world, but its economy is inefficient in many ways, most of the profit generated by manufacturing is absorbed by the cost of manufacturing. Enormous manufacturing actually pushes the GDP high, but the wealth generated by this activity is comparatively low. GDP measures how much is produced in a country but it doesn’t actually consider how much of that is being converted into wealth. And for every dollar of Chinese production exported to the United States, 55 cents are components and services produced in the US itself. This is exactly why India though not developed, has one of the fifth largest GDPs in the world. Its because a lot is produced in India to satisfy the needs of its people.
Coming to the next point, the American population is far more productive than China. America has a GDP of 21 trillion dollars economy with just 330 million people, whereas China has a GDP of 14.7 trillion dollars with 1.45 billion people. It’s clearly visible that the productivity rate of the American population is far greater than that of China, that is exactly why the Chinese economy is inefficient. Basically, it means that GDP per capita is far higher in the US than in China.
According to United Nations and world bank estimates, human capital that is education, skills, and experience accounts for more than half of the wealth of most countries and up to 80% of the wealth of the most developed nations. And this is one of the greatest strengths of the US. In China, just over 10% of the workforce has a university degree compared to 44% of the US workforce. Adding to that, the quality of Education in American Universities is far more superior to that of China. In China, there is not even free access to the internet or to scientific research of the rest of the world.
And then, China loses thousands of skilled workers, entrepreneurs, inventors, scientists, and engineers every year to countries like the US. The US adds nearly 1 million foreigners to its workforce every year! This seems to suggest that the US would be ahead of China in INNOVATION for the next half a century.
And then comes the uncontended supremacy of the dollar in the global financial markets. China can’t even dream of replacing USD for the next 75 years for various reasons – yuan isn’t as transparent, Chinese political system can’t be trusted, History sides with USD, and American Allies wouldn’t give up USD and embrace Yuan. Today dollar is used in almost all major trades. As a result, prices of commodities from gold to silver, copper to lithium, and iron to crude oil are dependent on USD. This shows how much the world economy depends on USD. This system of dependence makes it even more difficult to replace the USD.
Coming to the military, the American airforce is equipped with top-of-the-class fifth-generation fighters like F 22 Raptors and F 35s. F-22 raptors have far less radar crosssection than any Chinese so-called fifth-generation aircrafts. Apart from that, China has just come out with its fifth-generation aircrafts while the US is already testing sixth-generation aircrafts. Getting sixth-generation aircrafts operation as early as possible would obviously give the US a two-decade headstart compared to china. The air supremacy of the upcoming B 21 raiders would be unquestionable, again here too B 21 raiders would give America a two to three-decade leap. With the Zumwalt class destroyers combined with nuclear-powered carriers and an extensive network of allies, the US navy always has an edge. And with nearly 800 military bases in at least 80 countries all around the globe, the presence of the American forces, is everywhere. When it comes to Research and Development America has always remained two to three decades ahead of the competition. Take B 2 spirit bombers for example, still a state-of-the-art piece of technology. Even in cyber warfare, America is miles ahead of China.
During the cold war, at the height of its power, Soviet Union was never a match for US domination, economically or culturally. Like the Soviet Union in the past, China will face the same challenges. The US clearly has the biggest and the best-allied network which has been carefully engineered over the last century. China can’t aspire to get the same respect as the US, even if it surpasses the US in terms of GDP. And more than anything to achieve global supremacy, being the No.1 in economic and military terms is not just enough. A real superpower nation is one whose culture influences the world. English is now one of the most spoken languages in the world. The popularising of English was mostly done by the British during their colonization, which actually made it easier for America to gain cultural supremacy over the world. Being the global leader is not just about being the strongest but about inspiring other nations and influencing them. The US has significant soft power which will continue to drive its growth for decades. The world dreams American – about the American brands, movies, pop culture, and appreciates the concept of Liberty. China would have to change its entire system if it aspires to have a stature like the US.
Rishi D V