China, once touted as the successor to America's global dominance, may have to indefinitely postpone its ascension.
A recent economic forecast suggests that the world's second-largest economy will not break free from its current downturn, but will instead witness a continued deceleration in its growth rate to 3.5% by 2030 and approximately 1% by 2050.
By contrast, the U.S. is projected to experience a growth rate of 1.5% by 2050. These figures represent a downward revision from previous estimates, which predicted Chinese growth rates of 4.3% and 1.6% in 2030 and 2050, respectively.
Bloomberg Economics now anticipates that China's gross domestic product (GDP) will not surpass that of the U.S. until the 2040s, and even then, the lead will be marginal before China falls behind again. According to the economists, "China is down-shifting onto a slower growth path sooner than we expected.
The post-Covid rebound has run out of steam, reflecting a deepening property slump and fading confidence in Beijings management of the economy. Weak confidence risks becoming entrenched resulting in an enduring drag on growth potential."
For years, Western experts have speculated about how the U.S. might peacefully cede its superpower status to China. These discussions were driven by the belief, shared by figures such as Singapore's founder Lee Kuan Yew and other Beijing advocates, that China was poised to eclipse the U.S.
For example, the U.K.'s Centre for Economics and Business Research (CEBR) predicted in its December 2020 report that China would overtake the U.S. by 2028, five years earlier than previously expected, due to the Chinese regime's "skilful management of the pandemic and the hits to long term growth in the West," as reported by the BBC.
However, recent developments suggest that the notion of China as a paper dragon may have been accurate. TheBlaze reported last month that Beijing was scrambling to stabilize its plummeting currency amid a host of economic challenges, including failing banks, declining productivity, geopolitical tensions, and the potential collapse of several major corporations.
The situation has not significantly improved since then. Although Chinese property developer Country Garden did not declare bankruptcy like its counterpart Evergrande, the brief surge of optimism was fleeting. "China appears to be taking one step forward, but two steps back, as optimism one day turns to pessimism the next," said Susannah Streeter, the head of money and markets at Hargreaves Lansdown.
Despite various stimulus measures designed to boost consumption demand, such as reduced interest rates on new mortgages, a recent industry survey revealed that China's services sector fell to its lowest level in eight months in August. Furthermore, the country is grappling with record youth unemployment, which reached 21.3% in June, and a demographic crisis partly caused by the regime's one-child policy.
"The demographic problem, hard landing of the property sector, heavy local government debt burden, pessimism of the private sector as well as China-U.S. tensions do not allow us to hold an optimistic view towards mid- to long-term growth," Wang Jun, chief economist at Huatai Asset Management, told Reuters.
Desmond Lachman, a senior fellow at the American Enterprise Institute, echoed this sentiment, stating, "It is unlikely that the Chinese economy will surpass that of the United States within the next decade or two."
Some analysts have drawn parallels between China's economic slowdown and Japan's stagnation. However, Reuters pointed out that Japan's GDP per capita was already above the average for high-income economies when it began to stagnate, whereas China is currently at the middle-income level.
William Hurst, a professor of Chinese Development at the University of Cambridge, predicts a grim future for China, warning, "Things always fail slowly until they suddenly break." He told Reuters, "There is a significant risk in the short term of financial crisis or other degree of economic crisis that would carry very substantial social and political costs for the Chinese government. Eventually there's going to have to be a reckoning."
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