Originally Posted by
ORAC
Like Japan before it, China has peaked. With an aging population and the reserve of peasants from the land who can feed into the city industries its prospects are bleak - there are also articles reflecting how they can no longer attract the technologically skilled men they need into the military.
Their window of opportunity to overtake the USA as the dominant economy, an£ currency has closed and India will increasingly be the dominant power in the east…
The question is whether they will seek to move against Taiwan whilst they can - and to distract from the bad news at home…
China’s rise is reversing - FT
China’s share of the global economy is declining, and most economists expect this to continue.
"In 2022, China's share of the world economy shrank a bit. This year it will shrink more significantly, to 17%. That two-year drop of 1.4 per cent is the largest since the 1960s."
These numbers are in "nominal" dollar terms — unadjusted for inflation — the measure that most accurately captures a nation's relative economic strength.
China aims to reclaim the imperial status it held from the 16th to early 19th centuries, when its share of world economic output peaked at one-third, but that goal may be slipping out of reach.
China's decline could reorder the world.
Since the 1990s, the country's share of global GDP grew mainly at the expense of Europe and Japan, which have seen their shares hold more or less steady over the past two years. The gap left by China has been filled mainly by the US and by other emerging nations.
To put this in perspective, the world economy is expected to grow by $8tn in 2022 and 2023 to $105n. China will account for none of that gain, the US will account for 45 per cent, and other emerging nations for 50 per cent.
Half the gain for emerging nations will come from just five of these countries: India, Indonesia, Mexico, Brazil and Poland. That is a striking sign of possible power shifts to come.
Moreover, China's slipping share of world GDP in nominal terms is not based on independent or foreign sources. The nominal figures are published as part of their official GDP data. So China's rise is reversing by Beijing's own account.
Further, over the past decade, China's government has grown more meddlesome, and its debts are historically high for a developing country. These forces are slowing growth in productivity, measured as output per worker.
This combination — fewer workers, and anaemic growth in output per worker — will make it difficult in the extreme for China to start winning back share in the global economy.
In nominal dollar terms, China's GDP is on track to decline in 2023, for the first time since a large devaluation of the renminbi in 1994.
Given the constraints to real GDP growth, in the coming years Beijing can only regain global share with a spike in inflation or in the value of the renminbi — but neither is likely.
China is one of the few economies suffering from deflation, and it also faces a debt-fuelled property bust, which typically leads to a devaluation of the local currency.
Investors are pulling money out of China at a record pace, adding to pressure on the renminbi. Foreigners cut investment in Chinese factories and other projects by $12n in the third quarter — the first such drop since records begin. Locals, who often flee a troubled market before foreigners do, are leaving too.
Chinese investors are making outward investments at an unusually rapid pace and prowling the world for real estate deals.