0

Is China Overtaking America?

CAMBRIDGE – The twenty-first century is witnessing Asia’s return to what might be considered its historical proportions of the world’s population and economy. In 1800, Asia represented more than half of global population and output. By 1900, it represented only 20% of world output – not because something bad happened in Asia, but rather because the Industrial Revolution had transformed Europe and North America into the world’s workshop.

Asia’s recovery began with Japan, then moved to South Korea and on to Southeast Asia, beginning with Singapore and Malaysia. Now the recovery is focused on China, and increasingly involves India, lifting hundreds of millions of people out of poverty in the process.

This change, however, is also creating anxieties about shifting power relations among states. In 2010, China passed Japan to become the world’s second largest economy. Indeed, the investment bank Goldman Sachs expects the Chinese economy’s total size to surpass that of the United States by 2027.

But, even if overall Chinese GDP reaches parity with that of the US in the 2020’s, the two economies will not be equal in composition. China would still have a vast underdeveloped countryside. Assuming 6% Chinese GDP growth and only 2% US growth after 2030, China would not equal the US in terms of per capita income – a better measure of an economy’s sophistication – until sometime near the second half of the century.