Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Keep CounterPunch ad free. Support our annual fund drive today!

China’s Surge


Various observers have noted this week that China’s economy will be bigger than that of the United States in 2016. This comes from the International Monetary Fund’s (IMF’s) latest projections, which were made in its semi-annual April World Economic Outlook database. Since 2016 is just a few years away, and it will be the first time in more than a century that the United States will no longer be the world’s largest economy, this development will be the object of some discussion – from various perspectives.

First, let’s consider the economics. China has been the world’s fastest growing economy for more than three decades, growing 17-fold in real (inflation-adjusted) terms since 1980. It is worth emphasizing that most of this record growth took place (1980-2000) while the rest of the developing world was doing quite badly by implementing neoliberal policy changes – indiscriminate opening to trade and capital flows, increasingly independent central banks, tighter (and often pro-cyclical) fiscal and monetary policies, and the abandonment of previously successful development strategies.

China clearly did not embrace these policy changes, which were promoted from Washington by institutions such as the IMF, World Bank, and later the WTO. (China did not even join the WTO until 2002.) It is true that China’s growth acceleration included a rapid expansion of trade and foreign investment. But these were heavily managed by the state, to make sure that they fit in with the government’s development goals — quite the opposite of what happened in most other developing countries. China’s goals included producing for export markets, promoting higher levels of technology (with the goal of transferring technology from foreign enterprises to the domestic economy), hiring local residents for managerial and technical jobs, and not allowing foreign investments to compete with certain domestic industries.

China’s economy is still very much state-led, with the government controlling most of the financial system, the exchange rate, and about 44 percent of the assets of major industrial enterprises. That is why China was able to plow through the world recession with GDP growth of 9.8 percent, despite losing about 3.7 percentage points of GDP due to falling net exports.

Now for the politics and international implications. First, much of the discussion of China’s rise is written from a Washington perspective, that is, from the perspective of an empire. From this view, China’s rise is a “threat.” Since this view sees the supremacy of Washington and its allies as good for the world, China’s rise is also seen as a threat to the world. It is assumed that China will become an empire like the United States, but will not be so “benevolent” as the United States is.

This view is not supported by the facts. To take just current and recent history, it is the United States that invaded Iraq, leading to an estimated million deaths, is occupying Afghanistan, bombing Pakistan and Libya, and threatening Iran. The United States’ and its allies control over many developing countries’ economic policies, through the IMF, World Bank, and other institutions has also caused a lot of damage over the past few decades.

So a shift of power toward a more multi-polar world is likely to give us a more peaceful and just world. In fact, it is already happening: The majority of South America, for example, is now governed by democratic left governments that have produced positive reforms that benefit the majority – something that was practically impossible to achieve while Washington dominated the region. And of course the vast majority of people in the United States also stand to benefit from a smaller U.S. role in the world as we transition back to a Republic from an Empire: less spending on senseless wars, fewer casualties, fewer enemies, less distraction from our real problems at home.

China’s foreign policy is mainly geared toward securing the raw materials and trade that will fuel its growth and development. This is done through commercial transactions. Of course its corporations – like those of the rich countries – have come under criticism in various countries. But China does not try to tell other countries what their foreign policy towards other countries, or their overall economic policies, should be – as the United States often does. This is an important difference between a country that pursues its own national and economic interests, and an empire that seeks to impose its own order on the world.

It is always possible that China, once it becomes a rich country – and this is many years away – could develop imperial ambitions. But so far its leadership seems to see China as a developing country seeking to become a high-income country, and doesn’t see a role for empire in this process. “Hide brilliance, cherish obscurity,” as Chinese leader Deng Xioaping once said.

A few months ago press reports, using an exchange-rate measure of GDP, announced that China had become the world’s “second-largest economy” just this year. But by a purchasing-power-parity (PPP) measure, which adjusts for the difference in many prices between China and the U.S., China had become the second-largest economy years ago.

A technical matter: If we measure China’s economy in dollars at current exchange rates, it reached $5.9 trillion in 2010, as compared with $14.7 trillion for the U.S. By a purchasing-power-parity measure, its economy reached $10.1 trillion in 2010. It is that measure that the IMF projects to grow to $18.98 trillion in 2016, putting the U.S. in second place at $18.81 trillion.

However, it is likely that even the IMF’s PPP measure understates China’s GDP: Economist Arvind Subramanian has estimated that China’s PPP GDP in 2010 was already about even with that of the United States.

An IMF spokesperson, quoted yesterday by the Financial Times, weighed in on the debate:

“The IMF considers that GDP in purchase-power-parity (PPP) terms is not the most appropriate measure for comparing the relative size of countries to the global economy, because PPP price levels are influenced by non-traded services, which are more relevant domestically than globally ….The Fund believes that GDP at market rates is a more relevant comparison. Under this metric, the US is currently 130 percent bigger than China, and will still be 70 percent larger by 2016.”

It is true that the “market rate” measure is better for some comparisons. But one important place where the PPP measure is more relevant is in military spending. The cost of producing a military plane and training a pilot in China is much lower than in the United States. Washington’s current policy is to maintain military supremacy in Asia, but an arms race with China could make the Cold War look cheap by comparison. The Soviet Union’s economy was just a quarter of United States’ economy when we had that arms race. If the U.S. were to have a serious arms race with China, we could forget about Medicare, Social Security, and most of what our federal government spends money on.

Fortunately, a new Cold War with China is not in the cards for now. But the size of China’s economy is another good reason to make sure that it doesn’t happen.

MARK WEISBROT is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This column was originally published by The Guardian.

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

More articles by:

2016 Fund Drive
Smart. Fierce. Uncompromised. Support CounterPunch Now!

  • cp-store
  • donate paypal

CounterPunch Magazine


October 24, 2016
John Steppling
The Unwoke: Sleepwalking into the Nightmare
Oscar Ortega
Clinton’s Troubling Silence on the Dakota Access Pipeline
Patrick Cockburn
Aleppo vs. Mosul: Media Biases
John Grant
Humanizing Our Militarized Border
Franklin Lamb
US-led Sanctions Targeting Syria Risk Adjudication as War Crimes
Paul Bentley
There Must Be Some Way Out of Here: the Silence of Dylan
Norman Pollack
Militarism: The Elephant in the Room
Patrick Bosold
Dakota Access Oil Pipeline: Invite CEO to Lunch, Go to Jail
Paul Craig Roberts
Was Russia’s Hesitation in Syria a Strategic Mistake?
Lara Gardner
Why I’m Not Voting
David Swanson
Of All the Opinions I’ve Heard on Syria
Weekend Edition
October 21, 2016
Friday - Sunday
John Wight
Hillary Clinton and the Brutal Murder of Gaddafi
Diana Johnstone
Hillary Clinton’s Strategic Ambition in a Nutshell
Jeffrey St. Clair
Roaming Charges: Trump’s Naked and Hillary’s Dead
John W. Whitehead
American Psycho: Sex, Lies and Politics Add Up to a Terrifying Election Season
Stephen Cooper
Hell on Earth in Alabama: Inside Holman Prison
Patrick Cockburn
13 Years of War: Mosul’s Frightening and Uncertain Future
Rob Urie
Name the Dangerous Candidate
Pepe Escobar
The Aleppo / Mosul Riddle
David Rosen
The War on Drugs is a Racket
Sami Siegelbaum
Once More, the Value of the Humanities
Cathy Breen
“Today Is One of the Heaviest Days of My Life”
Neve Gordon
Israel’s Boycott Hypocrisy
Mark Hand
Of Pipelines and Protest Pens: When the Press Loses Its Shield
Victor Wallis
On the Stealing of U.S. Elections
Brian Cloughley
Drumbeats of Anti-Russia Confrontation From Washington to London
Michael Hudson
The Return of the Repressed Critique of Rentiers: Veblen in the 21st century Rentier Capitalism
Howard Lisnoff
Still Licking Our Wounds and Hoping for Change
Brian Gruber
Iraq: There Is No State
Peter Lee
Trump: We Wish the Problem Was Fascism
Stanley L. Cohen
Equality and Justice for All, It Seems, But Palestinians
Steve Early
In Bay Area Refinery Town: Berniecrats & Clintonites Clash Over Rent Control
Kristine Mattis
All Solutions are Inadequate: Why It Doesn’t Matter If Politicians Mention Climate Change
Peter Linebaugh
Ron Suny and the Marxist Commune: a Note
Andre Vltchek
Sudan, Africa and the Mosaic of Horrors
Keith Binkly
The Russians Have Been Hacking Us For Years, Why Is It a Crisis Now?
Jonathan Cook
Adam Curtis: Another Manager of Perceptions
Ted Dace
The Fall
Sheldon Richman
Come and See the Anarchy Inherent in the System
Susana Hurlich
Hurricane Matthew: an Overview of the Damages in Cuba
Dave Lindorff
Screwing With and Screwing the Elderly and Disabled
Chandra Muzaffar
Cuba: Rejecting Sanctions, Sending a Message
Dennis Kucinich
War or Peace?
Joseph Natoli
Seething Anger in the Post-2016 Election Season
Jack Rasmus
Behind The 3rd US Presidential Debate—What’s Coming in 2017