China grows stronger. The US grows weaker. Why?

[Martian2]

China's national power keeps growing. Relatively speaking, US national power is being diminished. Why?

President Donald Trump thinks it's the economy. Currently, China grows at 6.5% annually. In contrast, the US grows only at 2%. It doesn't take a genius to realize China will become the dominant economy in 15 years.

To fix the problem, President Trump canceled the TPP because the trade detriments (more imports) to the American economy was greater than the benefits (more exports).

President Trump is trying to remake America into a new China. He wants America to become a great manufacturing power and he's trying to bring manufacturing jobs back to the United States.

The logic is sound. Economic strength leads to military strength. For example, China seems to outbuild the United States in large naval ships every year. Thus, growing the US economy above its long-term average of 2% is imperative.

However, China's exports ($2 trillion) are only a small part of the Chinese economy ($12 trillion). The bulk of China's economy is dependent on the internal domestic market.

Every year, China's domestic economy keeps growing robustly because there is a technological upgrade propagating from the advanced eastern coastal cities and inward into less-developed China. This process will continue until all of China is as developed as the coastal cities. Thus, China's nominal per-capita GDP will eventually catch up to the United States.

This means the most important metric in evaluating future Chinese and US economic power is population size.

China has a population of 1.4 billion people.
The US has a population of 0.3 billion people.

There is no way for the US to offset China's 4-times population advantage.

Let's look at all of the important metrics.

China (3,053 Million Tonnes of Oil Equivalent) consumes 34% more total energy annually than the United States (2,273 MTOE) and this gap grows wider every year.

China (5,920 TeraWatt-hours) consumes 51% more electricity annually than the United States (3,913 TeraWatt-hours).

China (87,000 units) installs more industrial robots per year than the United States (31,400 units).

China produces and installs ($27.5 billion) more machine tools than the United States ($7.4 billion) every year.

It is obvious that China's overall economy experiences a higher rate of technological upgrade than the US every year. China invests more in industrial robots and machine tools.

As the Chinese per-capita technological investments move toward the US average, this diminishes the economic lead from the earlier American industrialization. China is catching up in per-capita levels of industrial robots and machine tools in its economy.

Since the China-US economic technological level is converging, this leaves population as the only determinant.

Since China's population is four times larger than the US, China's economy will keep growing until it is four times the US economy.

 

[TaiShang]

China's national power keeps growing. Relatively speaking, US national power is being diminished. Why?

President Donald Trump thinks it's the economy. Currently, China grows at 6.5% annually. In contrast, the US grows only at 2%. It doesn't take a genius to realize China will become the dominant economy in 15 years.

To fix the problem, President Trump canceled the TPP because the trade detriments (more imports) to the American economy was greater than the benefits (more exports).

President Trump is trying to remake America into a new China. He wants America to become a great manufacturing power and he's trying to bring manufacturing jobs back to the United States.

The logic is sound. Economic strength leads to military strength. For example, China seems to outbuild the United States in large naval ships every year. Thus, growing the US economy above its long-term average of 2% is imperative.

However, China's exports ($2 trillion) are only a small part of the Chinese economy ($12 trillion). The bulk of China's economy is dependent on the internal domestic market.

Every year, China's domestic economy keeps growing robustly because there is a technological upgrade propagating from the advanced eastern coastal cities and inward into less-developed China. This process will continue until all of China is as developed as the coastal cities. Thus, China's nominal per-capita GDP will eventually catch up to the United States.

This means the most important metric in evaluating future Chinese and US economic power is population size.

China has a population of 1.4 billion people.
The US has a population of 0.3 billion people.

There is no way for the US to offset China's 4-times population advantage.

Let's look at all of the important metrics.

China (3,053 Million Tonnes of Oil Equivalent) consumes 34% more total energy annually than the United States (2,273 MTOE) and this gap grows wider every year.

China (5,920 TeraWatt-hours) consumes 51% more electricity annually than the United States (3,913 TeraWatt-hours).

China (87,000 units) installs more industrial robots per year than the United States (31,400 units).

China produces and installs ($27.5 billion) more machine tools than the United States ($7.4 billion) every year.

It is obvious that China's overall economy experiences a higher rate of technological upgrade than the US every year. China invests more in industrial robots and machine tools.

As the Chinese per-capita technological investments move toward the US average, this diminishes the economic lead from the earlier American industrialization. China is catching up in per-capita levels of industrial robots and machine tools in its economy.

Since the China-US economic technological level is converging, this leaves population as the only determinant.

Since China's population is four times larger than the US, China's economy will keep growing until it is four times the US economy.

Yet another great comparative analysis by Martian2. Thank you!

Of course, I believe, population is a major determinant. But, not all populations are the same. For some countries, their large population is a curse, rather than a blessing.

Some countries with big population stands on weak economic fundamentals such as manufacturing, logistics, robotics, IoT, AI etc. For some countries, big population still means stunted bodily growth, low IQ, pollution, and an army of uneducated and jobless young people.

Then, what makes a population an asset or liability is perhaps the quality of government and governance. China's government is, at least, as efficient as that of the US, hence, it should reach a size four times of the US economy in due time.

This does not mean, however, that another hypothetical country with the same size of China in terms of population would achieve economic parity with China or out-pace the US.

 

[Mista]

China's nominal per-capita GDP will eventually catch up to the United States.

I don't think that's a given. No other major developed economies have caught up to the US in terms of nominal GDP per capita.

Let's be realistic. If you look at Taiwan or South Korea, the per capita GDP is barely half of the US and they are now growing at the same rate. The Europeans have lower GDP per capita and yet they are still growing slower than the US.

The only country which have a shot is Japan in the 1990s. But we know what happened. Their asset bubble burst and they are unable to recover fully since then because of their aging population.

The US's strength lies in its relatively healthy demographics and its ability to attract talent from all over the world into their institutions and companies.

 

[Martian2]

I don't think that's a given. No other major developed economies have caught up to the US in terms of nominal GDP per capita.

Let's be realistic. If you look at Taiwan or South Korea, the per capita GDP is barely half of the US and they are now growing at the same rate. The Europeans have lower GDP per capita and yet they are still growing slower than the US.

The only country which have a shot is Japan in the 1990s. But we know what happened. Their asset bubble burst and they are unable to recover fully since then because of their aging population.

The US's strength lies in its relatively healthy demographics and its ability to attract talent from all over the world into their institutions and companies.

I think you're wrong.

China can compete with the US across all levels of the economy, whereas Europe has failed.

China built a supercomputer to surpass the US. Europe does not build its own supercomputers.

China has Alibaba to rival US Amazon. Europe has nothing comparable.

China has Baidu to rival Google. Europe does not.

China has Tencent Weibo to rival Facebook. Europe does not.

China has shown it can compete with the US in high-tech. Europe has proven it can't. Thus, European per-capita levels are understandably lower than the US.

China's SMIC is at 28nm and moving towards 14nm. Europe's ST had announced it is dropping out of semiconductor logic chip manufacturing after 22nm.

China can match the US in all industries. Europe is a proven laggard. European per-capita income levels are not indicative of future Chinese per-capita GDP.

 

[Mista]

Even now the nominal GDP per capita gap between the US and China is still widening.

The US has 5x the per capita GDP of China. The US grows at 2% while China grows around 6-7%.

It's closing in in percentage terms, but widening in absolute terms.

 

[Martian2]

Even now the nominal GDP per capita gap between the US and China is still widening.

The US has 5x the per capita GDP of China. The US grows at 2% while China grows around 6-7%.

It's closing in in percentage terms, but widening in absolute terms.

It doesn't matter. There will come a tipping point when China's higher growth rate overtakes the US in absolute terms. This is a simple mathematical fact. Run a spreadsheet of future projections and you can see the effect.

 

[antonius123]

Actually most countries is getting weaker relatively due to economic crisis in 2008, however China is the most resilient one. Imho that's the reason why US is declining (only if) compared to China. But US is still growing better & stronger compared to other most developed countries.

So, it is actually china is growing faster than most of countries.

 

[Mista]

I think you're wrong.

China can compete with the US across all levels of the economy, whereas Europe has failed.

China built a supercomputer to surpass the US. Europe does not build its own supercomputers.

China has Alibaba to rival US Amazon. Europe has nothing comparable.

China has Baidu to rival Google. Europe does not.

China has Tencent Weibo to rival Facebook. Europe does not.

China has shown it can compete with the US in high-tech. Europe has proven it can't. Thus, European per-capita levels are understandably lower than the US.

China's SMIC is at 28nm and moving towards 14nm. Europe's ST had announced it is dropping out of semiconductor logic chip manufacturing after 22nm.

China can match the US in all industries. Europe is a proven laggard. European per-capita income levels are not indicative of future Chinese per-capita GDP.

These are not enough for countries as large as China. How much per capita GDP can a company contribute to China?

 

[clarkgap]

It doesn't matter. There will come a tipping point when China's higher growth rate overtakes the US in absolute terms. This is a simple mathematical fact. Run a spreadsheet of future projections and you can see the effect.

Impossible. As the economic amount of China increase, the growth rate of GDP will decrease. You need to know, US has more land and resource than China.

 

[Mista]

It doesn't matter. There will come a tipping point when China's higher growth rate overtakes the US in absolute terms. This is a simple mathematical fact. Run a spreadsheet of future projections and you can see the effect.

Then let's wait for that moment?

Otherwise it's the same as the Indians who claim they will surpass China because they have higher projected growth rates in the future, despite just 1/5 of China's size.

 

[Martian2]

Impossible. As the economic amount of China increase, the growth rate of GDP will decrease. You need to know, US has more land and resource than China.

No. China is larger in land area than the United States.

Then let's wait for that moment?

Otherwise it's the same as the Indians who claim they will surpass China because they have higher projected growth rates in the future, despite just 1/5 of China's size.

China has already surpassed the United States in energy consumption, electricity consumption, industrial robot installation, machine tool installation, car market size (24 million Chinese cars bought every year vs. 17 million American cars), white goods, etc.

The US economy is larger than China's only on paper (e.g. probably a faulty nominal GDP number because China's currency is dictated by the Chinese government and not priced by the marketplace). There is a strong likelihood that China's pegged currency is inaccurately portraying the size of China's economy.

 

[Mista]

Impossible. As the economic amount of China increase, the growth rate of GDP will decrease. You need to know, US has more land and resource than China.

It's not about land or resources. Industries have already evolved beyond that.

It's about the ability to squeeze productivity and innovation out of your populace by attracting top talents (wherever they are from) and emulate the best practices from them and diffuse it to the wider population. You need a open, transparent and porous system for that.

China has already surpassed the United States in energy consumption, electricity consumption, industrial robot installation, machine tool installation, car market size (24 million Chinese cars bought every year vs. 17 million American cars), white goods, etc.

I don't doubt that China will eventually surpass the US in total nominal GDP, but I thought we are talking about nominal GDP per capita?

 

[Martian2]

It's not about land or resources. Industries have already evolved beyond that.

It's about the ability to squeeze productivity and innovation out of your populace by attracting top talents and emulate the best practices from them and diffuse it to the wider population. You need a open and transparent system for that.



I don't doubt that China will eventually surpass the US in total nominal GDP, but I thought we are talking about nominal GDP per capita?

I'm saying China's situation is completely different from India's.

The Chinese nominal GDP and nominal per-capita GDP figures don't look right when you compare it to the actual energy and electricity consumption comparison between China and the US.

Nominal GDP is related to nominal per-capita GDP. Per-capita GDP is calculated by dividing nominal country GDP by the population.

If China's nominal GDP is wrong due to China's pegged currency then it means the per-capita GDP gap between China and the US is also much smaller.

 

[beijingwalker]

One power goes up, another power must come down, it's always a two way traffic. The resources relatively remain the same and the only thing people can do is to change the size of your share.

 

[F-22Raptor]

Even now the nominal GDP per capita gap between the US and China is still widening.

The US has 5x the per capita GDP of China. The US grows at 2% while China grows around 6-7%.

It's closing in in percentage terms, but widening in absolute terms.

China has failed to close the GDP gap in any significant way going on 4 years now. The US economy just added another $245 billion in the 3rd quarter, with an overall GDP of $19.5 trillion. The US is on pace to surpass $20 trillion by the 2nd or 3rd quarter next year. China simply isn't gaining enough ground on the US economy right now.

The Chinese economy is in long term steady decline. China won't be able to sustain these high growth rates due to an outdated model consisting of debt fueled growth, and a looming demographic crisis. In about 10-15 years, China will begin aging rapidly, putting significant pressure on the Chinese economy. You can expect declining growth rates, and social spending to soar, thereby diverting money from defense and S&T accounts. By around 2050, the Chinese population will then decline in huge numbers. The Chinese population is expected to decline by near 400 million people by 2100. China will essentially go through what Japan is now, just on a much larger scale.

US demographics, on the other hand, are much healthier. The US population is expected to grow to around 450 million by 2100. China will only be a little over twice as large then, and very old. China won't be able to sustain their current model. That is practically guaranteed.