Traditional world power vs. emerging world power. Although China is still only the challenger, the country is slowly overtaking the USA. These eight key indicators show how strong the Chinese economy already is compared to the US economy.
If you follow the Western party conference reports from Beijing, you could get the impression that an economically ailing system is retreating to its authoritarian, not to say dictatorial, core. In Western reporting, to stick with Marxist terminology, superstructure and base are confused.
The political superstructure is a party dictatorship with all the trimmings: suspension of civil liberties. The party is always right. Anyone who doesn’t follow will be taken away. The most important argument is and remains repression.
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However, the economic basis on which this communist party state can let off steam is an economy that is doing well despite the war in Europe, despite a global pandemic and a historically unique explosion in energy prices. The race to catch up with the USA, which one would like to replace as the global leader, is progressing more slowly than planned. But she’s making progress.
The comparison of the eight most important indicators shows the status of this historical conflict between an established world power and a world power in the making:
1. Economic growth in the USA has averaged 2.21 percent over the past ten years and developed on a roller coaster track bed in the pandemic years 2020 (minus 3.4) and 2021 (plus 5.7).
China, on the other hand, grew at an average rate of 7.64 percent over the past decade, i.e. the period in which Xi Jinping was in charge. The two pandemic years are also impressive – measured against the example of the USA: 2.24 percent in 2020 and 8.08 percent in 2021 are evidence of an economic robustness that has not been seen anywhere else in the West.
2. The continuous upward movement of the Chinese can also be seen in the per capita income. Under Xi’s leadership, people’s purchasing power, calculated using the concept of Purchasing Power Parity, has developed very favorably for the average Chinese:
In the USA, a much more mature economy, more wealth is generated per person, but with much flatter growth rates. In 2012, an American earned an average of 51,784 PPP dollars (purchasing power parity), in 2021 it was 69,287 dollars. An increase of around a third.
In the same period, per capita income in China has increased by more than 73 percent: from 11,168 PPP dollars in 2012 to 19,334 dollars in 2021. The Chinese earn less, but their growth curve is steeply upwards.
3. On the labor market, one must above all take into account the fact that here a former farming community has risen in rapid succession first to the industrial society and then to the service society. Xi Jinping didn’t invent any of it, but he did spearhead development, with the service industry now accounting for over half of China’s GDP.
4. In many high-tech areas, both China and the US hold a majority of all patents in the world. But: The People’s Republic is catching up. The country is particularly well represented in solar systems, big data and AI.
5. China prides itself on its low inflation rate and gloats domestically about “hyperinflation” in the West. In September, the rate of inflation was 2.8 percent, and the two percent mark has only rarely been exceeded in the past ten years. For comparison: In the USA, an inflation rate of 8.2 percent was last measured, in Germany 10 percent.
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The reasons include the cautious monetary policy of the People’s Bank of China, the strong export economy and a favorable energy partnership with Russia. There is no oil or gas boycott in Beijing.
However, the low inflation rate in China is also a product of the weakening domestic economy. The harsh measures of the zero-Covid policy have meant that domestic consumption has plummeted. Low demand also slows down the price increase.
6. Since the beginning of the corona pandemic, the Johns Hopkins Institute has recorded around 1.06 million corona deaths in the USA. In 2021, the second year of the pandemic, more people died than in 2020 despite the vaccine that was delivered.
For China, on the other hand, the institute reports 15,505 deaths. With its zero-Covid policy, China doesn’t want to give the virus a chance. Lockdowns and travel bans, if not to the delight of citizens or business, have become commonplace.
7. Life expectancy is also developing in opposite directions. The US health agency said it got worse in 2021 for the second straight month. With a loss of 0.9 years compared to 2020, it has fallen to a low of 76.1 years since 1996. One of the main reasons is the pandemic.
Nevertheless, it is rising in China. According to the National Health Commission China, in 2021 there was another increase to 78.2 years. That’s up 2.1 years from the United States.
8. China currently holds over $3.3 trillion in foreign currency reserves, making it the world’s largest reserve country, according to IMF data. For comparison: The value of the foreign currencies held by the Bundesbank is 298 billion US dollars, that of the US central bank is only 242 billion.
But, and now comes the big but: Xi Jinping is the first Chinese leader who dropped the traditional modesty of the Chinese and also the Chinese leaders from Deng Xiaoping to Jiang Zemin to Hu Jintao and changed the key. In his party speech, he again proclaimed his claim to leadership, wanting to win “the battle for international technology leadership”.
The cadres of the Communist Party like that. But it harms the Chinese way.
In doing so, he launched the containment policy of the Americans – which has already de facto destroyed Huawei. Biden is continuing what began with Trump: the rise of China should now be slowed down. Thanks in part to Xi’s cockiness, the former partner is seen as a cross-party rival in Washington. Developed semiconductors may no longer be delivered to China.
Gabor Steingart is one of the best-known journalists in the country. He publishes the newsletter The Pioneer Briefing. The podcast of the same name is Germany’s leading daily podcast for politics and business. Since May 2020, Steingart has been working with his editorial staff on the ship “The Pioneer One”. Before founding Media Pioneer, Steingart was, among other things, Chairman of the Management Board of the Handelsblatt Media Group. You can subscribe to his free newsletter here.
Conclusion: Xi, who, unlike his predecessors, passionately and credibly professes Marxism, is China’s strong man. But like many strong men before him, in the intoxication of his strength he committed a serious strategic error. To the US he ignored the most important wisdom of his predecessors, all of whom practiced a kind of stealth communism, which is: “You should shake the hand you can’t check off.”
Xi is the man who no longer wants to shake Americans’ hands. That could cost him his own.