Recently there has been a lot of concern about China's rapid rise in economic strenght. The mentioned article in The Economist explores the nature of some reactions by senior American political figures to this controversy.
The situation seems dire: drawing the comparison to the Sputnik moment in 1957. However this seems like a cliche political moment. A large number of Americans are overreacting to the rise of China. Many US political figures are not helping matters by exporting the blame of tough times, to pacify their respective constituencies.
Paul Romer, a Stanford University professor and Hoover Institution fellow mentions in his podcast that it is absurd to think that China will be anywhere close to the US in GDP per capita in the next 5 years. He goes on to mention that as China continues to grow, it's production will experience diminishing returns and it is unlikely that China will ever economically surpass the USA!
America is currently intimately interlocked with China in international trade. To view China as a threat is illogical. As whenever the American economy suffers, the Chinese economy feels the pain as well.
2 comments:
I don’t see any obstacles that would prevent China from surpassing the US in terms of GDP (nominal). Its labor resources are the highest in the world and it’s rapidly advancing in technology. Plus it makes huge investments in infrastructure. As mentioned in the article, while in 1957 the Sputnik was a clear signal to the US that it was behind the USSR in term of technology and the solution was obvious, invest in technology, today there is no consensus on what actions the US should take. Perhaps, it’s going to take a while before China’s GDP per capita comes closer to the level of the US, but it terms of nominal GDP it won’t take that long.
It is hard to believe that China will soon as the USA economy. It is as if everyone is freaking out about China while we are in a recession. I don't believe that China is in a current recession which means that they are a growing economy. While the US gains economic strength in the next months, years, or whenever this thing will end, we will be back on top in consumer spending. This will lead to stronger economy and China will most likely be in the rearview.
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