Not so long ago there was a widespread assumption that China’s economy surpassing that of the US to become the world’s largest was both inevitable and imminent. This was expected to be a major historical event, heralding a shift in geopolitical power to the East. This was not the first time in recent decades that an East Asian economic surpassing of the US had been expected. In the 1970s and early 1980s there was much talk of how Japan’s economy would become the world’s largest, and many a sci-fi movie of the era imagined Japanese economic and cultural dominance in the future.
Yet of course that never happened. Is the case of China different? It increasingly appears not. Or at least, if China’s economy does have a period as the largest, that increasingly seems likely to be very short-lived.
There are a number of reasons why. Partly there is a natural rhythm to economic catch-up for countries that begin quite poor (as China did, and Japan before it). An initial generation or two may be willing to work long hours for relatively modest pay by international standards, because even those levels of remuneration seem fantastically high to workers whose parents lived at subsistence levels off the land. This means that the fruits of economic growth can be used largely for investment, because even modest enhancements in consumption feel like riches beyond imagining. But at some point, as wealth increases, the expectations of younger citizens change and they demand more resources being devoted to consumption and more of their time being spent in leisure. Also, rapid economic development leads to developmental dead-ends and errors, with infrastructure built that is never used, borrowing mistakes that create debt overhangs, and even sometimes corruption and criminal gangs as new wealth creates opportunities.
As well as the economic implications, these trends may also have geopolitical consequences. We may be reaching the point of China’s nearest approach to US economic power, and the distance may grow quite rapidly again once that point is reached. That may mean for example that whereas there had until recently been a working assumption that China’s growing military might would mean its eventual absorption of Taiwan was only a matter of time, the window of opportunity may rapidly be closing. If China does not take Taiwan soon, its power relative to the US’ may start to decline so rapidly that seizing Taiwan quickly becomes implausible. Xi Jinping may soon face a now-or-never moment.
