The Surest Measure of How China's Economy Is Losing

Real Clear World ^ | 29 Nov, 2016 | Derek Scissors

[MtnClimber]

American presidential elections are a patchy time for the use of facts. It turns out presidential transitions are, too. Donald Trump as president-elect has triggered a slew of comments and articles about China’s pending leadership of the world economy. Journalists and pundits may value words over money; economists should not.

There are data, grounded in real-world calculations, that show China’s economic importance falling -- not rising slowly, nor staying stable, but falling. The most important indicator is net private wealth, which is the single best measure of a country’s economic size and of the pool of resources available to its public sector for military or social spending.

In work dating back to 2000 and carried out with no geo-economic agenda, Credit Suisse has estimated private wealth. The new estimates, through the middle of 2016, show American private wealth at $84.8 trillion and Chinese private wealth at $23.4 trillion. Moreover, the gap is widening. With $60 trillion less in private wealth than the United States, China’s global economic leadership is a fable.

Private Wealth

There are of course more facts to bring to the argument at hand than the Credit Suisse data, but the latter are an excellent place to start. The data series is well behaved statistically, which means it has credibility. It is measured globally, so shares can be calculated. The result: the People’s Republic of China’s level of private wealth actually fell from mid-2015, both in amount and in share.

[MtnClimber]

I wonder how much China’s decline corresponds to the level of communism/corruption exerted by the government.

[roadcat]

China's communism/corruption aside, their decline doesn't spell doom for China. They just won't achieve #1 status as a superpower, especially now that Trump is bringing us back from the brink.

Here's something else to ponder - the march of Islamic terrorism. Both China and the USA are better poised to ride it out than Europe and other civilized nations. Europe is going down the tubes. Some Pacific nations and large swaths of Africa also impacted.

I believe that despite China's decline in economic prosperity, they will recover. And the USA will soar again. So will other nations like Korea, Japan and a few others. This economic race between China and the USA is of minor importance compared to the wars about to rage elsewhere on this planet. Sad to say, but the misfortunes of Europe and elsewhere will mean prosperity to China and the USA.

[MtnClimber]

Yes, in the “War to Destroy Civilization” Europe is likely to be on the islamist side.

[DUMBGRUNT]

“War to Destroy Civilization”

Back in the 70's, a learned friend always said, it would be the US and the Russians, against the Chinese.
Because of a common race and religion. I now think he was correct.
Only the Chinese will stay home, unless there is a huge gain to be had.

[PGR88]

The USA is an economy burdened by leftist social engineering, over-regulation, massive debt, crony capitalism and elites strip-mining the middle class because their connections to government.

But in China - its 10 times worse.

[MMAqq]

Thanks for posting. I thinks it’s becoming pretty clear that planned economies can only advance so far, but that democracy and the rule of law are needed to create a first tier economy.

[goldstategop]

China has a market economy. Government owns key sectors of strategic/national importance.

Government has done a good job of lifting millions of people out of poverty and creating an imperfect rule of law state.

A transition to democracy is still decades in the future. People expecting dramatic change in China are bound to be disappointed.

But there is hope for a better life, something impossible in Mao’s China. Totalitarian China in the 70s was a poor, blank and grey country. No freedom.

When Deng came to power he sought to change it. The country became authoritarian and people could own private property, start a business and make lots of money and eat and live better and even travel.

Freedom isn’t comparable to what it is in South Korea and Japan but Chinese are a lot freer than they were under Mao. And that has a lot to do with their outlook for the future.

Its also why China isn’t going to disappear like the Soviet Union did. China is a real country with a rich culture and a history going back thousands of years.

Despite current economic troubles, its still destined to become an economic superpower.

[PGR88]

I don’t disagree with anything you say.

Its just that China has the heavy hand of statism, massive government and cronyism upon it. Off course its better than in the 1970s.

The low-lying fruit of development has been picked, IMHO. They face a low growth future.

In fact, as we become more centrally controlled in the USA, we and China are moving from opposite extremes towards each other.