cross-posted from: https://mander.xyz/post/55134497
Op-ed by Ruchir Sharma, Head of International business at Rockefeller Capital Management, an asset management company.
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Though many forecasters keep expecting China to surpass the US as the world’s leading economy, its growth peaked in 2021. Since then, China’s share of global GDP has fallen in nominal terms from 18 to 16.5 per cent, while the US share has risen to 26 per cent. China’s growth rate has dropped below the rest of the world, including the US. In real terms, independent estimates now put China’s growth in real terms closer to zero than to the official target of 4.5 to 5 per cent.
Even by the official numbers, AI is not providing a lift big enough to overcome other forces weighing on China, including its shrinking workforce, rising indebtedness, a broken property market, the revival of a meddlesome regulatory state and the resulting exodus of capital and people.
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The debt problem is partly a hangover of the great property bubble. Beijing responded to the global crisis of 2008 by pumping credit into real estate, which was the main contributor to growth in the last decade. Then the bubble popped, also in 2021.
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As property wealth shrivels so does consumer confidence, and retail sales are falling.
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Meanwhile, the government has moved on from property to pumping credit into new manufacturing industries, in effect replacing one debt bubble with another.
In late 2020, China launched a stunning regulatory crackdown on its big tech firms. Now, after retreating for a couple of years, an index tracking regulatory pressure is surging again. Giving up on making money in China, multinationals are scaling back operations. Net foreign direct investment is negative. Last year a record $425bn in capital flowed out of Chinese financial markets.
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People are leaving as well. The immigrant share of the population is stuck at just 0.1 per cent, a fraction of the share in India (which is just as populous). The number of western expats living in China has fallen markedly. It is historically unusual for a major power to have so little allure for foreigners and foreign money.
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The growing hype around Chinese AI doesn’t change the fact that 2021 was peak China. Given its demographic challenges and heavy debts, Beijing can’t do much to prop up domestic growth. It has shifted instead to dumping manufactured exports, but the resulting backlash is spreading fast. And AI isn’t a fix for everything. Its impressive powers may be the answer to many problems, but they can’t reverse the forces driving China’s decline.
Not to be a China apologist but why would USA fare better? USA is investing heavily in legacy fossil fuel, has crumbling infrastructure, no manufacturing expertise, has destroyed its ability to sign trade treaties, is working hard to destroy its image as a military superpower, and the economy is based on military handouts or an AI bubble depending on your outlook.
Whether it’s Chinese influence or not, there is a swell of anti-immigrant sentiment in most western countries right now, which is causing considerable amount of division, especially considering that they are in many cases dependent on that source of constant growth; China is doubling down on ethnic identity and nationalism. While humans certainly draw strength from our differences, there’s a tremendous amount of power to be gained by having a strong national identity.
there is a swell of anti-immigrant sentiment in most western countries right now, which is causing considerable amount of division, especially considering that they are in many cases dependent on that source of constant growth; China is doubling down on ethnic identity and nationalism. While humans certainly draw strength from our differences, there’s a tremendous amount of power to be gained by having a strong national identity.
This is almost a perfect example how parts of propaganda work.
You say ‘anti-immigrant sentiment in most Western countries [is] causing considerable amount of division’, but say ‘China is doubling down on ethnic identity and nationalism [from which there is] tremendous amount of power to be gained’.
So, while nationalism and anti-immigration sentiment in Western countries - fueled also by China-linked far-right groups and disinformation campaigns, btw - causes harm in the West, the same nationalism and anti-immigration sentiment means 'tremendous amount of power" for China.
The same thing - a deeply racist narrative that bets on a weirdly stubborn nationalism and suppression of foreigners and minorities as, for example, expressed by China’s newly introduced so-called Ethnic Unity Law - is (rightfully) framed as negative for the West, but (falsely and, in that case, hypocritically) framed as positive for China.
I feel like this article is purely focused on the amount of money flowing through each country’s economy. That’s great and all, but that doesn’t paint a complete picture of the well being of the populace. In the US, it’s all being funneled into the pockets of a few people at the expense of the health and well being of the majority.
I can’t comment on the situation in China, but there there seems to be no end to the number of articles about how shitty the US is.
In the US, it’s all being funneled into the pockets of a few people at the expense of the health and well being of the majority. I can’t comment on the situation in China …
- Since 1978, China has transformed from a poor, relatively equal society to a leading global economy with levels of inequality surpassing much of Europe and resembling the U.S.
- The state-owned (vs. privately-owned) share of China’s wealth fell from 70% to about 30%, compared to 0% in the U.S. (adjusted for debt).
- The share of China’s national income earned by the top 10% of the population has increased from 27% in 1978 to 41% in 2015, nearing the U.S.’s 45% and surpassing France’s 32%.
- Similarly, the wealth share of the top 10% of the population reached 67%, close to the U.S.’s 72% and higher than France’s 50%.
[Source]
The linked study could be updated with actual numbers that show inequality in China has widened since the study has been published,
The economic reforms initiated in China after 1978 initially reduced inequality in the country because the measures were focused on agriculture (particularly in rural areas) and in creating special economic zones (such as Shenzhen in the South) - and these were exactly the regions that witnessed slower growth in the period from 1950 to 1980.
When the coastal development strategy was initiated in the mid-1980s, inequality began to rise in China, because these coastal regions (and river delta regions) tended to grow faster compared to the other regions, thereby creating a trend of rising regional inequality that principally lasts to this day.
Today, around 20% of Chinese people are living in these coastal areas, and 33% of China’s GDP can be attributed there.
Today the level of inequality in China is almost equal to the of the U.S. by all comparative standards. In the mid-1980s, for example, the 1% richest Chinese owned 15% of the country’s wealth (when the share in the U.S. was 25%). In 2024, the 1% of richest Chinese owned more than 30% of the country’s wealth (U.S. it was 35%).
Today, both China and the U.S. show inequality levels far beyond European states, Canada, Australia, New Zealand, Japan, and practically all other democratically-governed countries.
You can play around yourself if you want to using the World Inequality Database. Here is the link for China: https://wid.world/country/china/
China’s entire economy isn’t betting on AI like the US is.
No one has said that.