Will Chinese Takeover Of U.S. Economy Matter
Will China overtake the United States as the world’s biggest economy? It almost certainly will.
China’s economy is now only a fourth the size of the $14 trillion U.S. economy, but given plausible growth rates in both countries, China’s output will exceed America’s in the 2020s, Goldman Sachs forecasts.
By itself, a richer China does not make America poorer. Indeed, because there are so many more Chinese than Americans, average Chinese living standards may lag behind ours indefinitely. By Goldman’s projections, average American incomes will still be twice Chinese incomes in 2050.
The real threat from China lies elsewhere. It is that China will destabilize the world economy. It will distort trade, foster huge financial imbalances and trigger a contentious competition for scarce raw materials. Symptoms of instability have already surfaced, and if they grow worse, everyone—including the Chinese—may suffer.
China strives to lock up supplies of essential raw materials: oil, natural gas, copper. If other countries suffer, so what? Both the United States and China are self-interested. But the United States has seen a prosperous global economy as a means to expanding its power, while China sees the global economy—guaranteed markets for its exports and raw materials—as the means to promoting domestic stability.
China’s economic nationalism may weaken the world economy—but if we retaliate by becoming more nationalistic ourselves, we may do the same. Globalization means interdependence; major nations ignore that at their peril.
