China in the Second American Century

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China in the Second American Century

The great engine of American capitalism is once again firing on all cylinders, meanwhile consternation reigns in China, where President Xi Jinping is nervously watching his dreams of dominating the global economy “go up in smoke.” Why? Because it’s quite likely that America’s economy is now growing at a faster rate than China’s. And this changes everything.

Until recently, the Chinese economic juggernaut seemed unstoppable. Once China joined the World Trade Organization in 2001, its GDP exploded. Unfettered access to American markets – combined with predatory trade practices – allowed China to grow an economy only one-tenth the size of America’s to one nearly two-thirds as large.

Just last year, Xi Jinping confidently predicted continued robust economic growth. He promised his people that, in the decades to come, China would dominate manufacturing, hi-tech, trade and just about everything else. He even boasted that by 2049 the Chinese economy would be three times the size of America’s and its military would be the world’s most powerful.

China’s rise seemed so inexorable in 2016, that Bloomberg News confidently predicted the exact year when America’s economy would be eclipsed by China’s. It was a virtual mathematical certainty, its analysts calculated, that in 2027 the Chinese dragon would overtake the American eagle.

That prediction was based on two assumptions that seemed reasonable, at the time:

  • First, that China would continue to grow its economy at 6.5 percent a year. And,
  • Second, that America would struggle to maintain the anemic 2 percent growth of the Obama years.

But, both those assumptions have been dramatically proven wrong.

Under the Trump administration, the American economy is rising like a phoenix from the ashes of over-regulation, over-taxation and bad trade deals, which had threatened to suffocate it.

China’s economic growth, on the other hand, is slowing under the burden of

  • a rapidly aging population,
  • massive corruption,
  • unproductive investments and
  • excessive debt.

Add to this the growing risk that Chinese products will be gradually pushed out of their largest export market, the United States, and you have the possibility of a full-blown economic meltdown in China.

As we’ve argued in recent issues, it’s becoming likely that U. S. growth of 3-to-5 percent a year will become the norm, at least through the early 2030s. But, even that lags the Chinese government’s plans for robust 6...

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