February 22, 2018

Rising China "US$42 trillion economy by 2030"


versus "US$24 trillion" for the US in 2030

4 comments:

Josh said...

@Pete

This kind of prediction is based on the simple extrapolation of last several decades. That doesn't work when the price of labor has increased by an order of magnitude in the same time period: the Chinese have reached the end of what cheap labor can achieve and are struggling to move their economy towards domestic consumption. To the extent the Chinese economy is still growing as fast as it is, it's being fueled by unsustainable lending.

There also is not so small issue of the demographic inversion that should be kicking right at the 2030 time frame - a massive labor shortage combined with a huge spike in health care costs, if not to the aging individuals, then to their offspring.

That prediction also assumes complete energy and political stability over that entire period, which also seems rather suspect. Note that the US is far less subject to energy issues than China is as the future #1 producer of oil (and only #2 consumer).

Bottom line, that number is unobtainable. It does seem likely that China will surpass the US in GDP, and we can expect it's continued military expansion until some economic or political destabilization occurs.


Cheers,
Josh

https://squidjigger.com
Josh@squidjigger.com
twitter: @squid_jigger

Peter Coates said...

Hi Josh

Yes the trends can work against Chinese economic size surpassing the US. This includes pollution, already causing Beijing to temporarily close some factories and coal power stations in northeastern China. China has limited water and arable land - something that may limit its high growth.

Also so many other unpredictable economic reverses can occur. I recall 1980s predictions that Japan/Asia would eventually surpass America in 20 years. Then the 1997 Asian Financial Crisis [1] caused slowdowns all over eastern Asia - and Japan hasn't fully recovered - let alone passed America by many measures.

[1] http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

Regards

Pete

Anonymous said...

I agree with Josh there that linear extrapolation never works in economics. China GDP growth today is mainly fueled by infrastructure investments (even though the returns on those investments are nil). At the same time, the days when China can export freely (even dump their more or less toxic foods) to other countries while limiting imports are numbered. Attempts to convert from an export driven economy to a consumer driven economy so far are not successful hence this One belt One road initiative.
KQN

Josh said...


I think it is worth pointing out that One Belt/One Road is a short to medium term jobs project, since the construction market is absolutely saturated in China proper. Longer term, it is a project to bypass the first island chain/IO and the Med. Even minor navies could block the straights connecting China to Europe and the mid east, never mind the USN. The move to build overland infrastructure and port facilities on the other side of India via CPEC is China conceding to geography: they have basically no ports available to open water, much in the same way the Russians don't. They are planning to have contingency infrastructure that bypasses the straights of Malacca and Lombok and rail infrastructure that goes all the way to Europe to bypass ocean transit altogether.

IMO this is an uphill fight, given the increased expense of rail transit. But there is a certain sweet spot where the extra speed of rail transit will justify the cost of using rails vice ships, for high value items and perishable goods. But end of the day One Belt/One Road is a huge gamble for China, and especially the countries hosting the infrastructure that have made very long term deals hosting its infrastructure.

Cheers,
Josh

https://squidjigger.com
Josh@squidjigger.com
twitter: @squid_jigger