By Judith Bergman
China has closed the gap with the U.S. “in most economic races, even overtaking it in some,” according to a recent report from Harvard’s Belfer Center for Science and International Affairs. The report, “The Great Economic Rivalry: China Vs. the US,” predicts that at the current rate, China will overtake the US economically within a decade.
Measured by purchasing power parity (PPP) — which compares national economies in terms of how much each nation can buy with its own currency at the prices items sell for in its market — China has already surpassed the US to become the world’s largest economy.
“When measured by PPP, in 2000, China’s economy was 36% the size of the United States,'” the report noted.
“In 2020, the IMF found it was 115% the size of the U.S. economy, or one-seventh larger. While Presidents Obama, Trump, and now Biden have talked about a historic ‘pivot’ to Asia, the seesaw has shifted to the point that both of America’s feet are dangling entirely off the ground.”
When it comes to trade, China has now displaced the US, according to the report:
“When this century began, China was knocking on the door of the WTO and the U.S. was the leading trading partner of most major economies. Today, China has overtaken the U.S. to become the largest trading partner for nearly every major nation… by 2018, 130 countries traded more with China than they did with the U.S., and more than two-thirds of those countries traded more than twice as much with China. With the launch of the Regional Comprehensive Economic Partnership (RCEP) in January, China has also now surpassed the U.S. as the leader of the world’s largest free trade block.”
The RCEP consists of China, Japan, South Korea, Australia, New Zealand, and the 10 members of ASEAN and is expected to add $500 billion to world trade by 2030.
China’s trade policies are not a matter of simply creating more wealth for China, but as with most things that China does, a way to increase China’s power and other countries’ dependency on it:
“As Xi Jinping explained last April, China’s strategy in thickening trading relationships is not just to spur its own economic growth. It is to increase other nations’ reliance on China,” the Belfer center concluded. “China’s goal – in Xi’s words – is to tighten ‘international production chains’ dependence on China… Xi’s strategy is working—not only with others but with the U.S. In 2021, purchases of products from China accounted for nearly half of America’s $1 trillion trade deficit. Today, the U.S. is the world’s largest debtor; China is the largest creditor. “
When it comes to manufacturing, China already displaced the US a decade ago:
“China has created a manufacturing ecosystem that allows it to dominate the production of almost everything,” the report found. “Initially a low-cost producer of inexpensive consumer goods, China became the world’s largest manufacturer in 2010 and accounted for 29% of global manufacturing value added in 2019 – a 20-point increase over 2000.”
China accounts for one-third of global manufacturing today, while the US manufactures less than one-fifth. While the US was the primary trading partner for most countries in 2001, today China holds that position. As such, China has become the crucial link in the world’s critical global supply chains:
“Despite the rhetoric about decoupling, foreign economies have become more dependent on China during the coronavirus pandemic, not less,” the report noted. “China’s trade surplus with the world hit a record $675 billion in 2021, a 60% increase from pre-pandemic levels in 2019… China is now the world’s largest manufacturer and exporter of scores of essential goods, including 90% of refined rare earth minerals, 80% of solar panels, 50% of computers, and 45% of electric vehicles.”
China has even replaced the US as the driver of world economic growth.
Read the rest of the article here: Gatestone Institute
