In recent years, there has been a notable shift among certain Western politicians, media outlets, and think tanks regarding their perspective on China’s developmental trajectory. The once-popular theory of an imminent Chinese collapse, famously asserted by Gordon G. Chang over two decades ago, has finally begun to lose traction. But there is still a lingering reluctance to acknowledge China’s sustained ascent, prompting the emergence of a new buzzword: “Peak China.”
As the second-largest GDP globally for 15 consecutive years, China’s economic landscape has naturally witnessed expansion alongside moderated growth rates, a phenomenon well-recognized in economic theory. In the context of China’s status as a super-large economy, fluctuations in economic indicators are intrinsic to its growth trajectory. To characterize these indicators as evidence of a prolonged economic recession is a stretch.
In search of a more nuanced understanding of China’s economic dynamics, let’s examine six of the most misguided myths that make up the “Peak China” narrative.
Myth 1: China’s Economic Size Won’t Surpass the United States’
Many economic institutions continue to maintain that China’s GDP will surpass that of the United States by 2035. But some analysts are venturing to suggest that China will never exceed the United States in total economic volume, pointing to the fact that the gap between China’s GDP and that of the U.S. widened in the past two years. Such viewpoints fail to align with the prevailing long-term economic headwinds. In 2023 China saw a GDP growth rate of 5.2 percent, while the U.S. lagged behind at just 2.5 percent. The widening gap between the two nations’ GDPs can be attributed to several factors but primarily the depreciation of China’s renminbi against the U.S. dollar.
A closer examination of the core GDP components reveals striking differentials between China and the United States. Surprisingly, China’s real economy significantly outpaces that of the U.S. across a variety of sectors: China’s grain output, reaching 700 million tons, surpasses that of the U.S. by 1.2 times, while its power generation of 9.2 trillion kilowatts is 2.3 times greater. China’s production and sales figures, totaling 30.16 million vehicles, triple those of the U.S. Steel output, towering at 1.36 billion tons, outstrips the U.S. by 19 times, while cement production at 2.23 billion tons dwarfs that of the U.S. by 20 times. China’s shipbuilding industry, with an impressive output of 42.31 million tons, exceeds that of the U.S. by an astonishing 70-fold. Through such figures it quickly becomes clear that the Chinese economy has resisted a so-called industrial hollow by prioritizing stable development over statistics and financial markets.
What most “Peak China” analysts cannot seem to grasp is that the Chinese government simply couldn’t care less about whether its GDP surpasses the United States’. Back in 2014, the International Monetary Fund crunched numbers based on purchasing power parity (PPP), declaring China as the world’s top economic powerhouse, leaving the U.S. behind. The Chinese central government greeted the news without fuss or fanfare.
Look it up: Over the past four decades, the idea of “outstripping the U.S.” in GDP has never graced official documents nor has it ever been a topic of discussion among China’s decision-makers. China’s developmental focus isn’t about outdoing others; it’s about surpassing its own benchmarks for a better quality of life.
Myth 2: China’s Real Estate Crisis Threatens Future Growth Momentum
Real estate remains a crucial pillar of the Chinese economy, especially as projections suggest that over the next decade, a staggering 100 million people will migrate to urban areas, driving demand for real estate development.
Nevertheless, the significance of real estate in China’s economy is waning, with the high housing price bubble gradually deflating. It is true that commercial housing sales plummeted from 18 trillion yuan in 2021 to 11.7 trillion yuan in 2023. But China’s private investment also surged by 9 percent in 2023 with the burgeoning so-called “new three” industries – solar power, electric vehicles, and batteries – compensating for real estate’s sluggish growth. First, the photovoltaic industry has seen remarkable growth, with the Chinese market expanding by over 20 percent in the last decade, boasting a market size of about 2 trillion yuan and over 50 percent of the global market share. Second, new energy vehicles recorded total sales of approximately 5 trillion yuan in the Chinese automobile market. In 2023, after nine consecutive years as the world’s largest car production and sales hub, China emerged as the world’s leading car exporter. Third, China dominates the lithium battery market, with its companies occupying six spots among the world’s top 10 power battery manufacturers and commanding a market share of 62.6 percent. According to analysis by the Finnish Energy and Clean Air Research Center, the pan-clean energy industry has become the primary driver of China’s economic growth, contributing to 40 percent of GDP growth in 2023, marking a 30 percent year-on-year increase. Compared to the United States and Europe, China’s new economy not only serves as a vital alternative to real estate for economic growth but also significantly contributes to mitigating global warming. The shift away from real estate dependence and the upsurge in new manufacturing highlight China’s high-quality economic development, a facet often overlooked in the more fevered discussions of “Peak China.”
Recent years have seen the ascent of China’s emerging industries, propelling a comprehensive transformation of the industrial landscape. Those who have actually been to China marvel at its e-commerce, 5G society, and seamless transportation.
In 2022, the added value of China’s “new three” economy, characterized by novel industries, formats, and business models, surged to 21 trillion yuan. The shift signifies China’s departure from a more traditional reliance on real estate as the primary driver, embarking on a trajectory of innovation-led growth. Myth 3: Foreign Investment Is Fleeing an Isolated China
Contrary to the familiar narrative, the much-hyped “decoupling” from China never materialized.
Despite a slight dip in 2023, China still attracted a whopping 1.13 trillion yuan in foreign investment, marking the third-highest influx in history. While labor-intensive industries saw an 8 percent decline in foreign investment, the high-tech sector netted 423 billion yuan, up 1.2 percentage points from 2022.
Amid the focus on the decline in overall FDI, Western media overlooked the surge of 53,766 new foreign-invested companies in China, a staggering 40 percent jump. It’s true that investment from the United States, specifically, waned, but investment from other developed economies ballooned. Investment from France grew 25 times and Sweden’s 11 times, respectively. Germany, Australia, and Singapore upped their investments by 212, 186, and 77 percent, respectively. In 2023, bilateral trade between China and Europe was worth a staggering $1.2 trillion. Although the represented a slight 1 percent dip from the previous year, 2023’s total remains the second-highest level in history. Meanwhile, trade between China and the U.S. amounted to about $660 billion in 2023, marking an 11.6 percent decline from the previous year. Despite this drop, it stands as the third-highest figure in history, far surpassing the trade levels in the early stages of the China-U.S. trade war that began in 2018.
These numbers underscore the deep interdependence between China and the West. They remain intertwined stakeholders, defying attempts at decoupling. For more anecdotal insights, consider the surveys issued by various countries’ chambers of commerce in China. They reveal that 80 percent of multinational companies express a desire to remain in China and are even ramping up their investments.
The majority of foreign firms report positive investment returns. But China’s market is fiercely competitive. Some multinational corporations have withdrawn – not necessarily due to political reasons but rather because of the emergence of strong domestic enterprises in China. This adds nuance to the picture of China’s economy not likely appearing in the next “Peak China” article. Contrary to the isolation advocated in the West against Chinese companies, China has consistently maintained an open and inclusive stance toward Western counterparts. China boasts the world’s most comprehensive manufacturing industry chain and consistently welcomes foreign investment; it’s not uncommon to see news of Chinese leaders engaging with Western companies. “Opening up” has become a national policy and has been written into the Chinese Constitution. With that in mind, how many multinational companies would willingly forfeit access to the lucrative Chinese market?
Myth 4: China’s Unemployment Rate Will Spark Social Turmoil
Political scholars generally assert that once unemployment hits 20 percent, a country faces social unrest. However, according to the latest data, China’s unemployment rate stands at just 4.8 percent. This figure has remained relatively stable over the past few years, indicating a healthy job market. While the global economic slowdown may have affected employment in certain sectors, China’s robust economic policies and initiatives have helped mitigate any potential social turmoil.
It is essential to recognize the complexities and nuances of China’s economic landscape and avoid succumbing to misleading myths and narratives. By examining the facts and data objectively, a more accurate understanding of China’s sustained growth and development can be achieved.
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