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Henry Thornton - Economics: A discussion of economic, social and political issues China v the United States: The economic comparison Date 15/12/2007
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David Jonson has recently visited both the USA and China. This is the first of a planned 3 articles.
By David Jonson Email / Print

Will the 21st century see the emergence of China as a global superpower to challenge the US? Many people believe that China’s rise is a certainty and that in time the regime will usurp America as the most powerful force in the world. However I believe the US will continue to be the pre eminent global power into this century and beyond. The United States will remain a stronger economic, diplomatic and military power ahead of China.


The US economy is streets ahead of China and will remain so for the foreseeable future. The United States will remain the number one economic power even with China’s rapid growth. In terms of GNP the US is at 11 trillion dollars while China is only at 2 trillion. Despite China’s continued economic growth in the double digits it is unlikely the US will be toppled.


China’s main economic advantage is its’ population of 1.3 billion people who are mostly poor by world standards. China’s economic growth is driven by the large population base of mostly unskilled manufacturers. Thanks to the one child policy China’s population will rapidly decline in a number of years on a scale far greater than in Japan or Western Europe. The one child policy will therefore undermine China’s crucial advantage and in time it will be neutralised with steep population decline. In contrast the US population is rapidly growing thanks to high birth rates and immigration from Latin America. According to the US census  the American population is expected to reach 570 million by the year 2100. Average American income is $44,000 dollars so US economic dominance looks set to continue in conjunction with population growth.


Big multinational companies have set up in China because wages are low and goods can be produced far cheaper. Foreign companies, not Chinese firms, are fuelling the growth. How many Chinese companies immediately come to mind? Once wages in China rise considerably companies will seek to move their operations to less developed, cheaper locations in Asia like India. Business is in China because of the low running costs and once it becomes cheaper to make stuff elsewhere many international companies will seek to relocate. Private Chinese businesses are few because their very existence threatens the Communist regime and its’ stranglehold on power. Private enterprise is tightly controlled by Beijing and will never compete with big American companies like News Corp or Nike. The Chinese companies that do exist are mostly manufacturers that simply steal Western intellectual property. China is a copycat not an innovator and cannot hope to compete with US companies that research new computers, space technology and so on.


Finally and most importantly the Chinese economy is bound to stumble and when it does the Communist party will face massive internal unrest. The Communist party in China is a dictatorship and the party has no real legitimacy. The economic growth over the past twenty years has provided the Communist party with a mandate it has never before had. The regime was never elected so it has claimed responsibility for Chinese economic growth which keeps the party popular. Inevitably there will be a correction in China and when this happens the regime’s one claimed success will vanish. When China suffers a recession the regime will have to contend with possible revolutionary feeling and calls for more freedom. With calls for freedom the very structure of China would likely fall apart, for example Tibet and Taiwan would call for their independence and separation from the PRC.

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