After rough 2022, can China still surpass the US?
A man pushes a child riding on a suitcase at Beijing West Railway Station in Beijing, Jan. 18, 2023. A population that has crested and is slowly shrinking will pose new challenges for China's leaders, including encouraging young people to start families and persuading older people to stay in the workforce longer.
Mark Schiefelbein/AP
Millions of Chinese are venturing back to their hometowns this week to usher in the Year of the Rabbit and celebrate long-delayed family reunions.聽
But casting a pall over the festivities are ongoing concerns that gathering will bring a new wave of COVID-19 to rural areas with limited health care, as the epidemic has claimed some 60,000 lives since the country abruptly reopened last month, according to official data. 鈥淭ough challenges remain,鈥� Chinese leader Xi Jinping said in a holiday video chat with medical workers Wednesday, 鈥渂ut the light of hope is right in front of us.鈥�
China鈥檚 chaotic emergence from its 鈥渮ero-COVID鈥� regime is one of several measures that made 2022 one of the nation鈥檚 most difficult years in decades, experts say.聽
Why We Wrote This
As new data on China鈥檚 slowing economic growth and declining population has cast doubt on the country鈥檚 rise, economists are recalculating their forecasts for U.S.-China competition. Many see strengths and weaknesses on both sides.
Beijing released economic data this week showing gross domestic product (GDP) growth declined to 3% in 2022, well below the government target of 5.5% and the second-lowest rate since 1976. It also announced a pivotal demographic shift 鈥� the country鈥檚 population declined in 2022 for the first time since the early 1960s. India is now expected to surpass China as the world鈥檚 most populous country this year.
Although the economy is expected to rebound from the reopening, the long-term trends of slower growth, low productivity, and a graying, shrinking population are prompting a rethink of China鈥檚 projected path to become the No. 1 economic superpower 鈥� recalculations that have major implications for the world and especially the Indo-Pacific, where China has served for many years as an engine of regional economic integration and growth.聽
China鈥檚 economy will 鈥渆xperience much slower growth going forward,鈥� says Roland Rajah, lead economist at the Lowy Institute, an independent policy think tank in Sydney. 鈥淒emographic and external head winds have intensified, while there is still little sign of the kind of major reforms needed in boosting productivity that could provide an offset.鈥澛�
A Lowy report co-written by Mr. Rajah last year projected that while China would become the world鈥檚 biggest economy by 2030, 鈥渋ts size advantage over America would be slim and it would remain far less prosperous and productive per person than the United States and other rich countries, even by mid-century.鈥� The Japan Center for Economic Research, which two years ago predicted China would surpass the U.S. in 2028, said in a forecast last month that 鈥淐hina鈥檚 GDP will not surpass that of the United States.鈥�
Indeed, Asian observers are paying keen attention to the relative balance of power between China and the U.S.
鈥淐hina made mistakes in 2022,鈥� says Kishore Mahbubani, a distinguished fellow at the Asia Research Institute of the National University of Singapore. Still, this was likely an aberration, says the former senior Singapore diplomat and author of the 2020 book 鈥淗as China Won?鈥澛�
鈥淚f you judge China鈥檚 performance by what it did in 2022, the prospects look bad, but ... the last 30 years of China鈥檚 performance still remain the best in China鈥檚 history.鈥�
A shaky pivot
China faces major hurdles in attempting to revive faster economic growth, not the least because Beijing鈥檚 COVID-19 controls and other policies have hurt confidence among consumers and private businesses.
After years of stimulating growth with investment in infrastructure like roads and high-speed rail and prioritizing less efficient state-owned enterprises, Beijing has signaled it seeks a model driven more by consumption and private companies. But economists say that shift has proved elusive.
鈥淭he shift to consumption-led growth鈥� requires many changes 鈥渁nd they are all hard,鈥� says Mary Lovely, senior fellow at the Peterson Institute for International Economics. 鈥淚t鈥檚 also a challenge for the political system,鈥� she says, as consumer choices gain more economic importance. 鈥淚t鈥檚 pretty clear that you are going to change who makes decisions.鈥�
Another challenge is that several of Mr. Xi鈥檚 signature policies 鈥� from draconian 鈥渮ero-COVID鈥� lockdowns, to a sweeping regulatory crackdown on technology companies and the reining in of high-profile entrepreneurs in the name of 鈥渃ommon prosperity鈥� 鈥� have rattled Chinese and foreign private investors.
鈥淴i Jinping in the last year has really made companies question China鈥檚 basic competence,鈥� says Scott Kennedy, trustee chair in Chinese business and economics at the Center for Strategic and International Studies. 鈥淐hina is going to have to do a lot to win back that confidence, first from their domestic population and then from the global business community.鈥�
As Beijing focuses on its domestic recovery, it will likely continue to work to stabilize relations with other countries and reassure investors, he says. At the World Economic Forum annual meeting in Davos, Switzerland, on Tuesday, Chinese Vice Premier Liu He pledged support for the private sector and market economy, adding, 鈥淐hina鈥檚 door to the outside will only open wider.鈥�
Asian countries recalibrate
In Asian countries, where the impact of competition between China and the U.S. is felt most acutely, experts closely track the shifting power balance between the superpowers.
Last year, for the first time in three decades, the growth rate of Asian developing countries would surpass that of China, according to a projection in September by the Asian Development Bank.
鈥淭he political and policy elites in many Asian countries constantly watch the Chinese economy, and they understand the head winds,鈥� says Li Mingjiang, associate professor in international relations at the Nanyang Technological University in Singapore. 鈥淭here are doubts now鈥� about how soon 鈥� or if 鈥� China will surpass the U.S.
鈥淭hat is one of the reasons they [the elites] want to diversify and they are concerned about overreliance,鈥� Dr. Li says.
China is the biggest trading partner of most Indo-Pacific countries, which see advantages in China鈥檚 huge market, infrastructure projects, established supply chains, and ease of negotiating trade agreements, says Dr. Li.聽
鈥淐hina has been very active in participating in and pushing for regional free trade agreements,鈥� he says. But he says there are complaints about the quality of Chinese investments and the low wages, environmental damage, and corruption associated with the projects.
Asian countries also actively seek more trade and investment with the U.S., says Miura Hideyuki, associate professor of international relations at Kyorin University in Tokyo. 鈥淲e are too dependent on China,鈥� he says.
Yet like many observers in Asia, Dr. Miura says Japan and other countries were 鈥渟hocked鈥� in 2017 when then-President Donald Trump withdrew the U.S. from the Trans-Pacific Partnership trade agreement between 12 Pacific Rim countries negotiated under his predecessor, Barack Obama. Many experts consider the U.S. withdrawal a grave strategic mistake.
Japan helped renegotiate the agreement as the Comprehensive and Progressive Trans-Pacific Partnership and, with other Asia states, has urged the U.S. to join it. China has already applied to join.
鈥淛apan shares a view of most Asian countries, that China is increasing investment and technology and is very intent on increasing its influence in the region,鈥� says Glen Fukushima of the Center for American Progress. 鈥淭he hope in Japan is that the U.S. will get its act together politically and be able to sustain its role as a leading innovative country鈥� in the region, he says.