Politics China's Economy and Politics


The failure of China’s zero-Covid policy is leading to a reassessment of Chinese power. Until recently, many expected China’s GDP to surpass that of the United States by 2030 or soon thereafter. But now, some analysts argue that even if China achieves that goal, the US will surge ahead again. So, have we already witnessed ‘peak China’?

It is just as dangerous to overestimate Chinese power as it is to underestimate it. Underestimation breeds complacency, whereas overestimation stokes fear; but either can lead to miscalculations. A good strategy requires a careful net assessment.

Contrary to conventional wisdom, China is not the world’s largest economy. Measured in terms of purchasing power parity, it became larger than the US economy in 2014. But PPP is an economist’s device for comparing estimates of welfare; even if China someday surpasses the US in total economic size, GDP is not the only measure of geopolitical power. China remains well behind the US on military and soft-power indices, and its relative economic power is smaller still when one also considers US allies such as Europe, Japan and Australia.

To be sure, China has been expanding its military capabilities in recent years. But as long as the US maintains its alliance and bases in Japan, China won’t be able to exclude it from the Western Pacific—and the US–Japan alliance is stronger today than it was at the end of the Cold War. Yes, analysts sometimes draw more pessimistic conclusions from war games designed to simulate a Chinese invasion of Taiwan. But with China’s energy supply exposed to US naval domination in the Persian Gulf and the Indian Ocean, it would be a mistake for Chinese leaders to assume that a naval conflict near Taiwan (or in the South China Sea) would stay confined to that region.

China has also invested heavily in its soft power (the ability to get preferred outcomes through attraction rather than coercion or payment). But while cultural exchanges and aid projects could indeed enhance China’s attractiveness, two major hurdles remain. First, by indulging in ongoing territorial conflicts with neighbours such as Japan, India and Vietnam, China has made itself less attractive to potential partners around the world. Second, the Chinese Communist Party’s domestic iron grip has deprived China of the benefits of the vibrant civil society that one finds in the West.

That said, the scale of China’s economic reach will remain important. The US was once the world’s largest trading power and bilateral lender. But now, nearly 100 countries count China as their largest trading partner, while only 57 have such a relationship with the US. China has lent US$1 trillion for infrastructure projects through its Belt and Road Initiative over the past decade, while the US has cut back aid.

China’s economic success story undoubtedly enhances its soft power, especially vis-à-vis other developing and emerging markets. And its ability to grant or deny access to its domestic market gives it hard-power leverage, which its authoritarian politics and mercantilist practices allow it to wield freely.

Where does that leave us in assessing the overall balance of power? Importantly, the US still has at least five long-term advantages. One is geography. The US is surrounded by two oceans and two friendly neighbours; China, by contrast, shares a border with 14 other countries and is engaged in territorial disputes across the region.

The US also has an energy advantage. Over the past decade, the shale revolution transformed it into a net energy exporter, whereas China has become ever more dependent on energy imports.

Third, the US derives unrivalled financial power from its large transnational financial institutions and the international role of the dollar. Only a small fraction of total foreign-exchange reserves is denominated in renminbi, while 59% are held in dollars. Though China aspires to expand the renminbi’s global role, a credible reserve currency depends on it being freely convertible, as well as on deep capital markets, an honest issuing government and the rule of law. China has none of these, making the renminbi unlikely to displace the dollar in the near term.

Fourth, the US has a relative demographic advantage. It is the only major developed country that is currently projected to hold its place (third) in the global population ranking. Seven of the world’s 15 largest economies will have a shrinking workforce over the next decade, but the US workforce is expected to increase by 5%. China, meanwhile, will suffer a 9% decline in its working-age population—which already peaked in 2014—and India will surpass it in terms of population this year.

Lastly, America has been at the forefront in the development of key technologies (bio, nano and information) that are central to this century’s economic growth. China, of course, is investing heavily in research and development, so that its technological progress no longer depends solely on imitation. It has managed to become competitive in fields such as artificial intelligence, where it hopes to be the global leader by 2030. US efforts to deprive China of the most advanced semiconductors may slow this progress, but they will not end it.

All told, the US holds a strong hand. But if it succumbs to hysteria about China’s rise or complacency about its ‘peak’, it could play its cards poorly. Discarding high-value cards—including strong alliances and influence in international institutions—would be a serious mistake.

One important issue to watch will be immigration. Around a decade ago, I asked former Singaporean prime minister Lee Kuan Yew whether China would surpass the US in total power any time soon. He said it would not, because America can draw upon and recombine the world’s talents in ways that simply are not possible under China’s ethnic Han nationalism.

For now, Americans have ample reason to feel optimistic about their place in the world. But if the US were to abandon its external alliances and domestic openness, the balance could shift.

Joseph S. Nye, Jr, a professor at Harvard University and a former US assistant secretary of defence, is the author, most recently, of Do morals matter? Presidents and foreign policy from FDR to Trump. This article is presented in partnership with Project Syndicate © 2023
https://www.aspistrategist.org.au/p...tm_source=CampaignMonitor&utm_term=Peak China
To view this content we will need your consent to set third party cookies.
For more detailed information, see our cookies page.
Apparently DUV machines now also sanctioned for China.

The Netherlands and Japan reached an accord with the US.


China’s economy is looking at a new wave of Japanification​

New research suggests that Beijing’s property market is as bubbly as Tokyo’s two decades ago

This one is also interesting:

The implications of China’s mid-income trap​

The IMF has chainsawed longer-term growth forecasts

They will soon see were this leads to. Except for guys like Brudermüller all see the signs.

Its not a fair and protected market basically you just help dictators and their minions bring misery upon everybody else for a few temporary bucks.

I even think the chinese market is practically non existant anymore as it is natural within a semi fascist pseudosocialist opressive state.

I read somewhere that around 500.000 small companies and self employed just vanished during Zero covid aswell. As no financial help for private enterprises was delivered. Onyl the highly inefficient state dinosaur companys got help.

Thats a fail model. No consumers and if something develops itself there it is suffocated by the state because of fears of losing influence.

They just don't have the economic base. Only blabla.

But feel free to follow Ray Dalio and his charts of empires and put all your money there.


China sees first net capital outflow in more than 2 years​

Declines in exports and investment from overseas shrink inflows


Foreign investment in China slumps to 18-year low​

Economic and political worries spur more exits and fewer new entries

A bad thing is that the uncontrolled CCP "investment" doesn't save the world economy.

But its unsustainable aswell in the end.
LoL might explain why some are so über positive all the time about China.

Some will lose whole factories eventually. What do they have as securities Xis words? ?

Cool that they built up a modern industry for the enemys of freedom. Which they then just nationalize.

Asia ·China

Mark Mobius warns that investors should ‘be very, very careful’ in China, after revealing he can’t get his money out of the country​

Rare earths - which are used in magnets in everything from phones to wind turbines and fighter aircraft - have long been a pain point for automakers and the clean-energy sector, because of unpredictable prices and China's tight grip on the supply chain. China accounts for around two-thirds of mining and 85% of refining of the materials.

Tesla's ambition to remove rare earths from future models has producers in the sector reeling, but it also should spur global efforts to deliver alternatives for electric car motors that currently rely on the materials.
Model 3 and Model Y powertrains have already reduced consumption of heavy rare earths by a quarter, and Tesla's next drive unit includes a permanent magnet motor that doesn't use any of the materials, Colin Campbell, vice president of powertrain engineering, said during the company's investor day early this month.
The automaker is looking to keep driving down costs, avoid processes with environmental and health risks and reduce reliance on commodities that can be most susceptible to wild price swings.
No more technical detail sorry.
How can any company invest for a future in China when it deliberately says it will invade via state news and is gearing up for it.
BTW, these fictitious 100 million Chinese were all in the 30 and under demographic.

Have to admit I have been ordering heaps of stuff from aliexpress lately. Their freight forwarder has magic carpet and best mates with the local postal service. I can't even send stuff to my neighbor for their price from china.
China is still considered a “transitional” country by the UPU, which means it enjoys a lower rate for sending mail to a developed nation like the US. As a result, mail services from China to the US cost less than Americans are charged by their postal service for a comparable domestic delivery.

I don't know how this works in detail but somehow we pay Chinas shipping costs. Never understood why this hasn't ended.
To view this content we will need your consent to set third party cookies.
For more detailed information, see our cookies page.

Similar threads