In 2014, Financial Times It highlighted to several columns on its cover how China would surpass the United States in purchasing power that year. The image of that edition of the British newspaper was shown this week by the director of the seminar Thinking the 21st century, Emilio Lamo de Espinosa, within an explanation of how the Asian giant has grown at the same time speed of “a rocket” since 1952.
Seven years have passed since that cover was published and it is still not known with precision when will China give the overtaking definitive to the United States as the first world power. What we do know, after more than a year of pandemic, is that that moment is already near and it is inevitable.
Covid-19, which many baptized in its first stage as ‘the Chinese virus’, has placed Beijing in a position of great advantage over the rest of the world in terms of growth. The Chinese economy grew by no less than 18.3% in the first quarter of 2021, according to the latest data from the National Statistical Office (ONE).
This is data that consolidates the rebound of the great Asian power after it managed to close the year 2020 with an advance of 2.3% in terms of GDP, which allowed it to be the best large economy in the worst year for the economic progress in recent history.
All this in a year in which The United States suffered its worst fall since 1946 in terms of GDP as it suffered a contraction of 3.5%. Worse was what happened in the euro zone, with a fall of 6.6%, from which no rebound has yet been achieved.
We do not know precisely where the Chinese GDP will be in 2025, although as UBS strategy director Roberto Scholtes explains, its authorities have a roadmap to continue accelerating its advance. And they have transferred it to the market through their 14th Five-Year Plan 2021-2025 throwing a “unequivocal” message that the country aspires to lead the transitions that they are going to live in the technology sector and in the ecological transition.
Are two economic engines that the West also has in its sights and for which investors have a great appetite, which assures Beijing the necessary financing to comply with a plan that also incorporates improvements in citizen well-being.
The advantages of copying
As Lamo de Espinosa said, in China they have made a virtue of necessity and the country has known how to take advantage of the advantage of arriving last by copying what others had invented with a less expensive procedure.
A model that has had global repercussions in terms of wages and that Donald Trump put in the spotlight of the Americans with the beginning of a protectionist policy that his successor, Joe Biden, is going to modulate but with no intention of ending it completely. Washington is aware that whoever wins the technological war will rule the world of the Digital Revolution that Covid-19 has accelerated.
However, behind the Chinese boom there is more than technology. His demographic advance clearly plays in your favor. Given that GDP reflects per capita productivity, the expected increase in population in Asian economies will soon lead the world economic order.
However, that will not occur at the same speed in the distribution of political power, Lamo de Espinosa warned in the aforementioned digital seminar organized by the International University of La Rioja (UNIR). China’s GDP will surpass that of the United States in a short time, but “it will take decades to do so in terms of power.”
The US defense spending exceeds 9.4% of the country’s wealth, while that of China is 5.4%. And in terms of well-being, while the base salary in the American economy exceeds 1,000 euros per month, in China it stands at 281 euros, according to data collected in datosmacro.com.
In any case, this rise on the geostrategic board of a country with democratic deficits leads the West to rethink many debates. One of them is whether GDP should remain the benchmark indicator to measure the health of the economy and the well-being of your society.
As the economist Mariana Mazzucato explained last week in Wake Up, Spain!, GDP has its limits and is not capable of reflecting all indicators of economic progress what the academic world should be looking at.
GDP represents the value of services and goods produced in an economy over a period of time. However, the teacher warned, it does not take into account factors such as sustainability: the damage that certain growth models have in the long term, as has been demonstrated with the economies of coal.
This debate is not new, but without a doubt, the acceleration that the pandemic has given to the creation of that new world economic order that will have East as axis and West in the ‘small image’ of the world map It will encourage many researchers in the Atlantic economies to put GDP shortfalls on the table.
As the inventor of national accounting, Simon Kuznets, said in the 1960s, you have to differentiate “between quantity and quality” of growth and take into account its costs and benefits in the short and long term.
GDP is unable to show how income is distributed among citizens, does not contemplate the unpaid ‘care economy’, not even quality or level of the education system of an economy. Nor does it measure the quality of its infrastructures. It is assumed that countries with higher levels of GDP per capita have higher quality in these services and goods, but it is not a verified factor when we resort to this indicator of well-being.
And of course, GDP does not incorporate the black economy, something that has been weighing down Spain’s position in the rankings of global economies for many years now.
Its evolution is key to measuring the impact of a crisis -such as the current one- and has a direct impact when it comes to calibrating the deficit volume or debt.
According to the IMF, global debt reached 98% of world GDP in 2020. Does this lead us to planetary bankruptcy? Fortunately, to answer this question you have to look at many other indicators.