2030: China as the G1 Hyperpower

Discussion in 'China' started by KleanKoke, Sep 16, 2011.

  1. KleanKoke

    KleanKoke Regular Member

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    Economics focus: The celestial economy | The Economist

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    IT IS perhaps a measure of America’s resilience as an economic power that its demise is so often foretold. In 1956 the Russians politely informed Westerners that “history is on our side. We will bury you.” In the 1980s history seemed to side instead with Japan. Now it appears to be taking China’s part.

    These prophesies are “self-denying”, according to Larry Summers, a former economic adviser to President Barack Obama. They fail to come to pass partly because America buys into them, then rouses itself to defy them. “As long as we’re worried about the future, the future will be better,” he said, shortly before leaving the White House. His speech is quoted in “Eclipse”, a new book by Arvind Subramanian of the Peterson Institute for International Economics. Mr Subramanian argues that China’s economic might will overshadow America’s sooner than people think. He denies that his prophecy is self-denying. Even if America heeds its warning, there is precious little it can do about it.

    Three forces will dictate China’s rise, Mr Subramanian argues: demography, convergence and “gravity”. Since China has over four times America’s population, it only has to produce a quarter of America’s output per head to exceed America’s total output. Indeed, Mr Subramanian thinks China is already the world’s biggest economy, when due account is taken of the low prices charged for many local Chinese goods and services outside its cities. Big though it is, China’s economy is also somewhat “backward”. That gives it plenty of scope to enjoy catch-up growth, unlike Japan’s economy, which was still far smaller than America’s when it reached the technological frontier.

    Buoyed by these two forces, China will account for over 23% of world GDP by 2030, measured at PPP, Mr Subramanian calculates. America will account for less than 12%. China will be equally dominant in trade, accounting for twice America’s share of imports and exports. That projection relies on the “gravity” model of trade, which assumes that commerce between countries depends on their economic weight and the distance between them. China’s trade will outpace America’s both because its own economy will expand faster and also because its neighbours will grow faster than those in America’s backyard.

    Mr Subramanian combines each country’s share of world GDP, trade and foreign investment into an index of economic “dominance”. By 2030 China’s share of global economic power will match America’s in the 1970s and Britain’s a century before (see chart). Those prudent American strategists preparing their countrymen for a “multipolar” world are wrong. The global economy will remain unipolar, dominated by a “G1”, Mr Subramanian argues. It’s just that the one will be China not America.

    Mr Subramanian’s conclusion is controversial. The assumptions, however, are conservative. He does not rule out a “major financial crisis”. He projects that China’s per-person income will grow by 5.5% a year over the next two decades, 3.3 percentage points slower than it grew over the past two decades or so. You might almost say that Mr Subramanian is a “China bear”. He lists several countries (Japan, Hong Kong, Germany, Spain, Taiwan, Greece, South Korea) that reached a comparable stage of development—a living standard equivalent to 25% of America’s at the time—and then grew faster than 5.5% per head over the subsequent 20 years. He could find only one, Nicolae Ceausescu’s Romania, which reached that threshold and then suffered a worse slowdown than the one he envisages for China.

    He is overly sanguine only on the problems posed by China’s ageing population. In the next few years, the ratio of Chinese workers to dependants will stop rising and start falling. He dismisses this demographic turnaround in a footnote, arguing that it will not weigh heavily on China’s growth until after 2030.

    Both China and America could surprise people, of course. If China’s political regime implodes, “all bets will be off”, Mr Subramanian admits. Indonesia’s economy, by way of comparison, took over four years to right itself after the financial crisis that ended President Suharto’s 32-year reign. But even that upheaval only interrupted Indonesia’s progress without halting it. America might also rediscover the vim of the 1990s boom, growing by 2.7% per head, rather than the 1.7% Mr Subramanian otherwise assumes. But even that stirring comeback would not stop it falling behind a Chinese economy growing at twice that pace. So Americans are wrong to think their “pre-eminence is America’s to lose”.

    Bratty or benign?

    If China does usurp America, what kind of hegemon will it be? Some argue that it will be a “premature” superpower. Because it will be big before it is rich, it will dwell on its domestic needs to the neglect of its global duties. If so, the world may resemble the headless global economy of the inter-war years, when Britain was unable, and America unwilling, to lead. But Mr Subramanian prefers to describe China as a precocious superpower. It will not be among the richest economies, but it will not be poor either. Its standard of living will be about half America’s in 2030, and a little higher than the European Union’s today.

    With luck China will combine its precocity in economic development with a plodding conservatism in economic diplomacy. It should remain committed to preserving an open world economy. Indeed, its commitment may run deeper than America’s, because its ratio of trade to GDP is far higher.

    China’s dominance will also have limits, as Mr Subramanian points out. Unlike America in the 1940s, it will not inherit a blank institutional slate, wiped clean by war. The economic order will not yield easily to bold new designs, and China is unlikely to offer any. Why use its dominant position to undermine the very system that helped secure that position in the first place? In a white paper published this week, China’s State Council insisted that “China does not seek regional hegemony or a sphere of influence.” Whether it is precocious or premature, China is still a tentative superpower. As long as it remains worried about the future, its rivals need not worry too much.
     
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  3. KleanKoke

    KleanKoke Regular Member

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    Interesting to see that by then...China will be 3x as large as India
     
  4. Dovah

    Dovah Untermensch Senior Member

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    No offence but it would be very hard for PRC to suppress1.5 billion Chinese who are economically strong, great wealth and Communism aren't really pals.
     
  5. KleanKoke

    KleanKoke Regular Member

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    China is not Communist in the market sense....quite the opposite in fact
     
  6. Dovah

    Dovah Untermensch Senior Member

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    The governance is still very much oppressive, hence, when(if) China were to become as economically sound as the article suggests the economic benefits are bound to trickle down to the populace because of the form of Chinese economy, an educated and rich populace is bound to show dissent and demand greater rights, herein lies the paradox for PRC, greater wealth vs greater control?
     
  7. The Messiah

    The Messiah Bow Before Me! Elite Member

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    They will come down like a house on fire. Educated people will demand democracy...it is only inevitable.

    Then they will become a circus.
     
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  8. LurkerBaba

    LurkerBaba Staff Administrator

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    China will just stay selfish and ethnocentric. Throughout history, China hasn't really influenced the world (apart from east asia) culturally or ideologically

    Protestant Christianity vs Hanization :pound:
     
  9. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    If Mao can kill 30 million+ chinese a few dissidents are no problem.
     
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  10. KleanKoke

    KleanKoke Regular Member

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    When China is economically sound? It is already there as it's nearly the size of the mighty US economy. As long as the the Chinese people continue to accrue wealth, they'll be content. Hard to argue against successfully pulling out the hundreds of millions of people out of poverty. In Shanghai, wealth is on parity to the West but yet CCP enjoys popularity there.
     
  11. KleanKoke

    KleanKoke Regular Member

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    Again, people in Shanghai are very well educated..on par with any country in the world. The test scores of their students prove it. Top in mathmematics. And yet they are very content with the status quo.
     
  12. Dovah

    Dovah Untermensch Senior Member

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    Nope. Its 3 times smaller than the US economy with 3 times the population.

    Point taken. But what happens when the euphoria of poverty alleviation ends?
    What would an upper middle class guy choose? Freedom or a few more dollars?
     
  13. Dovah

    Dovah Untermensch Senior Member

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    Thats what I fear too.
     
  14. Rahul92

    Rahul92 Senior Member Senior Member

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  15. KleanKoke

    KleanKoke Regular Member

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    Look at the above chart. % of global dominance is nearly equal in 2010.

    Based on personal opinion, the CHinese will choose $$
     
  16. KleanKoke

    KleanKoke Regular Member

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    Awesome find. Thank you.
     
  17. Rahul92

    Rahul92 Senior Member Senior Member

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    So you guys have understood what the situation will be in 2030 let me show you about 2050
     
  18. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    With half of Eurpean banks bankrupt, European union will still be at such a high position?? It is doubtful if the Euro collapses.
     
  19. Rahul92

    Rahul92 Senior Member Senior Member

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  20. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    I doubt it
     
  21. agentperry

    agentperry Senior Member Senior Member

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    chinese policy is outward oriented having subjects of international status under debate and policy making while simultaneously maintaining china itself but in india the core topic of policy making is personal attacks and winning again in election without doing anything on ground.

    if this structure is not broken and our stubborn peasant and poised to doom leaders are not replaced by active and capable people then i fear that India might not be on 3rd position by 2030 and will further decay. ( mamta banerjee is the one i would like to kill first, yes before kalmadi and mayawati)
     

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