Ambrose Evans-Pritchard
By pulling the trigger on rare earths, Xi Jinping has destroyed global trust in
China’s share of the global economy is shrinking for the fourth year in a row. Few are aware of this astonishing development, and even fewer predicted it.
Chinese GDP equaled three-quarters of American GDP in 2021: it has fallen to just two-thirds today, when measured at market exchange rates, the relevant metric for the projection of world power across the full strategic spectrum.
“The era in which China’s share of global output was surging has ended,” says Mark Williams, head of Asia at Capital Economics. The yuan may rise again, but woe betide Chinese deflation if it does.
Productivity growth has collapsed and has even been negative by some measures. It has underperformed the US and other advanced economies since Xi Jinping took power in 2012 and turned away from China’s Great Reopening.
“Economic growth is being powered almost entirely by investment, despite diminishing returns and escalating debt,” says Williams.
The malaise has spread even to Chinese manufacturing, long thought immune. “There is mounting evidence that industrial policy is itself partly to blame,” he says.
Capital Economics says the trend rate of output growth is likely to drop to 2pc this decade. By then the demographic crisis will be deepening. China’s workforce will be 8pc smaller in 2040.
China will not overtake the US to become the world economic hegemon by 2050 on current trend lines.The gap may instead widen slightly, assuming that America overcomes its Maga fever in time to avert economic suicide.
Yet at the same time, China is running away with the electrotech revolution. China owns the global solar industry and it controls every stage of the supply chain for electric vehicles – from mineral mines to battery technology.
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