In an unexpected turn of events, China, once heralded for its unprecedented rise as an economic superpower, is now facing a reversal, potentially marking the end of a significant global narrative spanning over half a century.
The Soaring Ascent and Sudden Shift
China, emerging from stagnation under Mao Zedong in the 1960s and 70s, embraced global openness in the 1980s, experiencing rapid growth in the subsequent decades. However, the trajectory that saw its share of the global economy rise nearly tenfold from below 2 percent in 1990 to 18.4 percent in 2021 is undergoing a significant reversal.
Changing Figures: A Nominal Perspective
In 2022, China’s share of the world economy experienced a slight contraction, and projections indicate a more substantial decline to 17 percent in the current year. This two-year drop of 1.4 percent, measured in “nominal” dollar terms, is the most significant since the 1960s, challenging China’s ambitious goal of reclaiming its historical imperial economic status.
Global Dynamics: Shifting Shares
The decline in China’s economic standing has broader implications. As China’s share of global GDP grew at the expense of Europe and Japan, these regions have stabilized over the past two years. The gap left by China has been filled mainly by the US and other emerging nations, underscoring potential power shifts.
Underlying Challenges: Real Growth vs. Adjustments
Despite China’s focus on real GDP growth, creatively adjusted for inflation, its official data may mask underlying challenges. The ongoing decline in its working-age population and increased governmental interference are hampering growth in productivity. China’s real long-term potential growth rate is now closer to 2.5 percent.
Implications: Beyond the Illusion of Growth
China’s high levels of debt and government intervention are inhibiting productivity growth, making it challenging for the nation to reclaim its share in the global economy. In nominal dollar terms, China’s GDP is projected to decline in 2023 for the first time since 1994.
President Xi’s Confidence vs. Economic Realities
Despite President Xi Jinping’s expressed confidence in China’s unstoppable rise, current economic indicators suggest a different reality. Even with diplomatic efforts, China’s share in the global economy is poised for a decline in the foreseeable future.
Conclusion: A Post-China World
The world is entering a new era, moving beyond the narrative of China’s economic dominance. The once-unstoppable rise is now met with challenges that may redefine global economic dynamics.