The Chinese Communist Party leader Xi Jinping in early January 2021 outlined his vision for the party and called for conviction and confidence amid unprecedented global challenges at the Party School of the CCP’s Central Committee.
Xi repeatedly announced that “time and momentum are on our side,” despite problems such as the coronavirus outbreak, supply chain disruptions, deteriorating relations with the West, and a slowing economy. Indeed, economic growth in China this year is sluggish, and the outlook for next year may be even worse.
George Magnus, a research associate at Oxford University’s China Center and Soas, wrote the article “From economic miracle to mirage—will China’s GDP ever overtake the U.S.?” to analyze various factors that make the dream challenging to come true for the CCP.
Magnus pointed out that China’s economic growth in the 30 years to 1990 had been remarkable, with the overall GDP size increasing from only 5% of the United States to 66%.
However, China’s growth rate quickly ended, and the huge gap in GDP growth vanished. Currently, the gap between the GDP of the U.S. and China is up to $9 trillion, which means that it will be difficult for China to overtake the U.S.
Magnus reminded readers that, in the history of world economic development from 1930 to now, each period would have predictions of some countries dominating the world in each field such as: in the 1930s, many people thought that Germany would dominate the world; in the 1960s, many people believed that the Soviet Union would dominate space technology. However, none of these things happened.
The researcher also revealed that China is the 21st-century version of this phenomenon. In the 20th century, both the Soviet Union and Japan experienced excessive savings and high investment, leading to high debt. In addition, due to the long-term failure of institutions and governance, their development models cracked and produced unmanageable consequences.
China’s investment rate as a percentage of GDP is 10% higher than the peak period of the Soviet Union and Japan. This is closely related to improper capital allocation and inefficiency and the widespread debt-servicing problems.
It is worth noting that China’s “zero-Covid” policy for epidemic prevention may cause it to be separated from the world economy until 2023 or beyond. Over-indebtedness and the critical point of current real estate have also contributed to China’s economic slump.
Additionally, China’s economic structure is out of balance. Its per capita income is comparable to that of Mexico, but its per capita consumption is not higher than that of Peru. Consumer spending accounts for about 37% of GDP, slightly higher than in 2010 but much lower than in 2000. And population growth has stalled.
To indeed reduce the gap between the rich and the poor and enhance people’s living standards, Magnus pointed out that China’s economic liberalization, gradual and redistributive reforms are required, which Xi Jinping opposes.
To increase the CCP’s and the country’s economic dominance, Xi sought a more ideological and dictatorial government strategy. As a result, the private sector has found itself in a political dilemma that is incompatible with the productivity and invention on which economic growth depends.
Magnus concluded that the way for China to surpass the U.S. is to implement policies that Xi opposes, rather than telling the China story. It may always be an illusion for China to catch up with and eventually replace the United States.