China to Overtake U.S. Economy by 2032

I am not sketical that China has a quickly growing economy, but models that project 20 years into the future often fail to account for black swan events (ex: 9/11, 2008 financial crises, famine/drought, decline in oil price since 2013, etc) that require total model changes. I expect at least 1 of these events in the next 20 years and likely a few. I’m thinking: Environmental crises, Demographics crises in China (too many men, not enough women) Debt crises North Korean crises

Should be interesting to see how China and India use their economic might to influence global culture (i.e soft power).

What often gets lost in the equation, because it's difficult to put a number to, is robustness. The Chinese economy can be looked at as a gaggle of one trick ponies. For example, you can go to a Chinese factory, hand them a blueprint, and get very good results, on maybe the third run, after you iron out all the kinks.

American industry iterates on proven designs that have been iterated on continuously since the Industrial Revolution. Our creative professionals can get very specialized. I met a young lady engineer once who could talk your ear off about toilets. She was in charge of a very niche aspect of toilet design and her one specialty likely numbered in the hundreds.

Now I'm not saying that Chinese engineers can't produce quality products. What I'm saying is that as quality as these products are, they're still stone age in many, many, many respects compared to American designs. Techies can't really see or understand this because all of this collected industrial knowledge isn't open source and is passed through institutions.

They can produce a toilet that works. We can produce a toilet design that lasts 4 times longer, uses 30% less water, meets recyclability guidelines for porcelain, does not compromise strength yet is 40% lighter, and can be packed 30 per pallet rather than 10. Sure it gets manufactured in China, and they might rip off one of our designs, but they're going to be perennially playing catch-up. Can they make that toilet in 10 different fashions to match both upscale and low-end bathrooms? Rinse and repeat for every single other consumer and industrial product that modern society uses.

We've been dominant in so many areas for so long that for China to even get on our level would mean to first create a middle class that's the same size as ours, so they can start iterating on a similar level as we have been doing for over a hundred years. That's no mean feat. Just because they're moving similar quantities of products around as we are doesn't mean that that wealth is getting shared with the public enough to create a professional class.

And until they can create a professional class of their own, they will always be playing second fiddle to our professional class.

“Distribution of family income - Gini index measures the degree of inequality in the distribution of family income in a country. The more nearly equal a country's income distribution, the lower its Gini index, e.g., a Scandinavian country with an index of 25. The more unequal a country's income distribution, the higher its Gini index, e.g., a Sub-Saharan country with an index of 50. If income were distributed with perfect equality the index would be zero; if income were distributed with perfect inequality, the index would be 100”

In this table Finland is #1, USA, 40th from the bottom, China is 30th from the bottom. This shows that the size of your economy and how fairly the wealth is distributed is not correlated. It also says that the so-called "American Dream" is a fantasy for much of the population. I also think that this is an index that is important to track _over time_ and I don't know of anyone doing that because then you could see if the country/society/region you're living in is getting more or less unequal over time. I know that I'd prefer that my daughter lived in a country where the wealth was more evenly distributed than than when I was growing up.

In Rawls' Theory of Justice he gets you to imagine that by a "veil of ignorance" you don't know where your position in society is. Given that, he says, you'd prefer a more fairly balanced society and world because you don't know which segment of society you'd be born into and which part of the world. Going by Rawls you'd prefer to be born in Finland (or most places in Europe) rather than China or the USA.

I make some bad calculations based on bad assumptions. Like GDP = GDP per cap * pop (though it worked out roughly). I took the average yearly growth of US from 2000 - 2016 and the average yearly growth of China from 2000 - 2016, plotted them and compared them.

There is an intersect (China leading) on total GDP in 2019 and an intersect (China leading) of GDP per capita in 2030.

Anyway, here's an image of it: https://imgur.com/vKjJCpN

Here's better data: https://www.weforum.org/agenda/2016/12/the-world-s-top-econo...

Quote from above:

Both the IMF and the World Bank now rate China as the world’s largest economy based on Purchasing Power Parity (PPP), a measure that adjusts countries’ GDPs for differences in prices.

You don't have to be economist to understand this either. You can go to virtually any corner of the Earth, walk in to a shop and find that roughly 50%-80% things in there are made in China. Think about that for a second. There are over 200+ countries in the world, 85% of people are outside China and still half of the stuff is made by just one country. There is often a someone in China making money when a person anywhere on the planet walks in to a shop and buys something. Think about the scale of that GDP now.

Truly groundbreaking work.

China has many of the same problems with country supported banks, bad loans to prop up the economy, etc.

what's the reasoning behind this claim? Purely population growth?

Also surprised Brazil is supposed to have a top 6 economy by 2032. Isn't their economy in the gutter and based on soybean and oil production?

I have no doubt that China will be a major economic player in the coming decades. Having said that, they have major hurdles to clear, perhaps most of which is transitioning from a manufacturing to a service economy that exists outside of China.

China's services-based companies that you all think of (Tencent, Baidu, Alibaba, etc.) all ape on foreign services and succeed under the protection of government (via. the GFW). Meanwhile, the massive uplift of median wage and living conditions has increased the labour costs in China. I've seen it in my own work, where our 'manufacture in China' approach isn't nearly as beneficial as it was 5+ years ago, since it now costs more due to underlying wages (i.e. controlling for forex). This sort of puts a time limit on their growth at the current rate, because as it becomes more expensive, manufacturing will move (and already is) to other cheaper areas (such as Bangladesh, India and further to Africa).

In other countries, that uplift has broadly aligned with a transition out of manufacturing to services due to the higher education capacities, with subsequent offshoring of said manufacturing. The problem is, those services-based companies compete on a global scale and utilise that global market size to support higher profits (since duplicating knowledge is easier than duplicating phyiscal things). I can't think of on example off my head of a Chinese services-based company that's competed on a global level yet.

I think until that can happen (and I don't see how that happens, particularly but not limited to in tech, when the playing field is so distorted by government policy such as the GFW - it just encourages companies to focus domestically only), China will struggle to make that next step and continue to fuel their economic growth as manufacturing becomes too expensive with the growth of wages. The foreign influx of money from manufacturing will slowly dry up as it goes elsewhere. In turn, I think that'll lead to a stagnation unless they can transition, and I suspect that transitioning (to a level that the West operates) probably requires a ratio of market size to median wage that isn't possible by simply remaining domestic (in the most part, that is you need at least a minimum quantity of global companies to bring in overseas wealth and support the rest).

Interestingly, I've seen a little example of this attempted, where China is trying to build the infrastructure for future manufacturing places, but that's sort of a one-trick operation. For example, they've invested a heap of money into building infrastructure (rail, for example) through Africa. However, it's only a subset of a truly global economy and probably has a finite life as a stop-gap.

So yes, their growth is almost undoubtably going to be relentless and ongoing, but my uneducated opninion is that the pace will taper off sooner than most people expect as they struggle to convert high domestic manufacturing output to domestic knowledge and services output.