Many thought China’s economy would soon eclipse America’s. That would allow China to become the world’s pre-eminent military power, and supplant America as the world’s most powerful country. But others believe China’s relative clout is nearing a peak
The previous consensus, both within and outside China, was that its economy would soon eclipse America’s. That, in turn, would allow China to become the world’s pre-eminent military power, and so supplant America as the world’s most powerful country. This remains a common view. Yao Yang, a respected economist at Peking University, believes China’sBut others believe China’s economic clout relative to that of its rivals is nearing a peak.
The biggest swing in sentiment relates not to population but to productivity. Back in 2011 Goldman Sachs thought labour productivity would grow by about 4.8% a year on average over the next 20 years. Now the bank thinks it will grow by about 3%. Mark Williams of Capital Economics takes a similar view. China will fall “off the path of an Asian outperformer onto the path of a solidly respectable emerging economy”, he says.
It is not just their own government that is hobbling Chinese businesses. In October America imposed controls on sales of advanced computer chips to China. This will hurt Chinese firms making products like mobile phones, medical equipment and cars. Goldman Sachs has not incorporated this damage into its long-term forecasts, but estimates that China’sThe tech war could go further.
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