In 2024, China and the United States released the GDP data for the first quarter, which showed that China's total GDP was only 59% of that of the United States, once again triggering the US media to hype up the widening gap between China and the United States.
Among them, the US media even threw out a so-called "70% rule".
The US media believes that China's economy has shown signs of slowing down, the proportion of GDP is declining, and it will be difficult to catch up with the United States in the future.
What is the "70% rule" and why is the GDP gap between China and the United States getting wider?
The source in this article comes from the official media [People's Daily Guangming Network], but in order to improve the readability of the article, the details may be edited, please read sensibly, for reference only!
70% enchantment
The "70% curse" theory has its roots in the experience of Japan in the 80s and the Soviet Union in the late Cold War.
At that time, Japan's economy was growing rapidly, and its total GDP was close to 70% of that of the United States. This has caused wariness and concern in the United States, which sees Japan as a potential threat to challenge its economic supremacy.
As a result, the United States has adopted a series of trade restrictions and sanctions against Japan, such as imposing quota restrictions on Japanese exports, initiating antidumping and countervailing investigations, and demanding that Japan greatly appreciate the yen exchange rate.
These measures directly led to the bursting of Japan's economic bubble, which led to a prolonged downturn and trouble, unable to eventually catch up with the United States.
Similarly, the Soviet Union, under the pressure of the arms race, once reached about 70% of the total GDP of the United States.
After the end of the Cold War, in order to suppress the Soviet Union, the United States imposed all-round economic sanctions and blockade on it. This, coupled with the deterioration of the internal contradictions of the Soviet system, hastened the economic collapse and eventual disintegration of the Soviet Union.
It is precisely by drawing on the lessons of Japan and the Soviet Union mentioned above that some strategists and media in the United States, who think highly of themselves, have tried to raise the "70 percent" threshold to a so-called "curse" threshold.
They claim that as long as a country's total GDP is close to or exceeds 70% of that of the United States, then the United States must, out of the so-called "threat theory," impose all-round sanctions and suppression on the country in terms of trade, finance, science and technology, etc., so as to maintain its economic hegemony from being shaken and surpassed.
Reasons for changes in GDP
In recent years, China's share of GDP relative to the United States has indeed declined, which is closely related to the Fed's interest rate hike cycle and the trend of the RMB exchange rate.
In 2021, China's total GDP was about 17.7 trillion US dollars, accounting for 18.5% of the global economy that year, equivalent to about 77% of the GDP of the United States.
However, in 2022, as the Federal Reserve began to raise interest rates continuously from March, the dollar index continued to strengthen, and the RMB exchange rate against the US dollar began to depreciate significantly.
In the first quarter of this year, the renminbi depreciated sharply against the dollar by nearly 10 percent, and China's GDP in the first quarter was only 59 percent of that of the United States at current exchange rates.
At the same time, in order to maintain export competitiveness and prevent capital outflows, China has not followed the pace of the Fed in raising interest rates at the same time, resulting in the depreciation of the renminbi against the dollar.
The depreciation of the renminbi has directly led to the "shrinkage" of China's total GDP in US dollar terms.
For example, in 2023, although China's GDP growth rate will remain stable at around 5%, the total GDP in US dollar terms will still shrink significantly from the previous year due to the cumulative depreciation of the RMB against the US dollar of nearly 10%.
This means that China's real GDP in renminbi terms will be undervalued when converted into dollars. As a result, the gap between China's GDP calculated by the value-added method and the GDP calculated by the expenditure method of the United States has widened.
In addition to directly affecting the shrinkage of GDP, the depreciation of the RMB exchange rate will even produce imported inflation, which will squeeze domestic production and consumption from both supply and demand ends, and further drag down GDP growth.
In 2023, China's CPI will continue to hover at a high level of around 2% year-on-year, which will have a negative impact on economic development, but the decline in the proportion of GDP does not represent a decline in China's economic strength.
On the contrary, in recent years, China has continued to make efforts in key areas such as scientific and technological innovation, industrial transformation, and institutional optimization, and new economic fields have emerged, and endogenous growth momentum has continued to grow.
In addition, there are certain differences between China and the United States in terms of GDP accounting methods.
China uses the production method or value-added method in GDP accounting, while the United States uses the expenditure method when calculating GDP.
In terms of composition, in 2022, the final consumption expenditure of the United States accounted for 68.5% of GDP, of which household consumption accounted for 54.6% and government consumption accounted for 18%. Gross fixed capital formation (investment) accounted for 20.3% and net exports accounted for -4%.
China pays more attention to the added value created by the production sector, showing the characteristics of paying equal attention to industry and service industry. In the United States, on the other hand, more emphasis is placed on the consumption and investment of final goods and services, in which household consumption and services dominate.
The way forward
GDP data calculated in purchasing power parity is more reflective of a country's actual economic strength.
According to this accounting method, China's GDP is close to 80% of the size of the United States, and it is expected to surpass the United States to become the world's largest economy in the future.
In 2022, China's total GDP reached $27.7 trillion in purchasing power parity terms, about 79.4% of the $34.9 trillion in the United States.
On a per capita level, the United States is $63,960 and China is $19,800. The overall strength is comparable, but there is still a certain gap in the per capita level.
In this case, if China can maintain the current economic growth rate of about 6%, and the United States can maintain the growth level of about 2%, then China's GDP in purchasing power parity terms is likely to catch up with the United States and become the world's largest economy around 2030.
Under this trend, it is generally expected that the world economic pattern will undergo profound changes in the next 10-20 years.
The economic status of traditional developed economies such as the United States and the European Union will decline relatively, while the economic strength of emerging market countries will continue to rise, and eventually overtake developed countries and become the new engine of the global economy.
Spells don't work
China is fundamentally different from Japan and the Soviet Union, which makes it difficult for some of the traditional methods used by the United States to deal with them in the past to be effective for China, especially the so-called "70% curse" phenomenon.
From upstream resource supply, to midstream manufacturing and processing, to downstream modern service industries, China has initially built a complete industrial chain with a complete range of categories, laying a solid foundation for China's economy to smoothly transition to a high-quality development stage, and is unlikely to repeat the mistake of Japan and the Soviet Union's industrial hollowing.
At the same time, light industries closely related to people's livelihood consumption, such as household appliances, textiles and garments, and food processing, have developed and matured in China, providing a solid guarantee for residents' lives, so that China's supply side will not be as seriously imbalanced as Japan or the Soviet Union, and thus fall into a long-term downturn and turmoil.
It will be relatively easier for China to switch to domestic demand-oriented development once exports are blocked, while Japan and the Soviet Union lacked such a large domestic market to support them.
At the same time, as the world's second largest economy, a major trading country, and a major foreign investment country, China is very closely connected with the world economy, and even if it encounters trade disputes, the cost of severing such ties will be heavy, which has created certain conditions for maintaining the opening up to the outside world.
Finally, China has established a diversified network of partnerships with the BRICS, the Shanghai Cooperation Organization, and the Association of Southeast Asian Nations (ASEAN), which can be leveraged by the onslaught of unilateralism to diversify its strategic partners and avoid being held hostage by individual powers, while Japan and the Soviet Union clearly lack sufficient support in this regard.
All this greatly reduces the risk of repeating the "70 percent curse," so if the United States wants to exert pressure on China, it will be difficult to use the old methods of dealing with Japan and the Soviet Union alone.
In addition, the United States itself is also facing huge pressure from inflation and needs to raise interest rates at a high level for a long time, which poses a severe test to the real economy and the financial system.
Excessive interest rate hikes will exacerbate problems such as manufacturing stagnation, wealth disparity, geopolitical contradictions, and even brew a new financial crisis, restricting the sustainable development of the United States, thereby weakening its ability and durability to exert pressure on other countries.
China has every condition and confidence to get out of the current difficult period of development and get rid of the impact of the "70% curse".
Although the external pressure caused by the US interest rate hike has increased periodically, it is not an irreversible long-term impact.
On the contrary, the multiple difficulties faced by the United States itself, such as inflation and financial crisis, are also weakening its ability to suppress other countries for a long time.
As long as China maintains its strategic focus and concentrates on running its own affairs well, China's economy will surely be able to move steadily and long-term along the track of high-quality development.
conclusion
Under the current international situation, China should continue to maintain economic development, prevent the United States from passing on the crisis to China, and at the same time continue to work hard for the internationalization of the renminbi and embark on the development path of "dollar hegemony".
Only by developing the economy with high quality and enhancing the endogenous driving force of development can China improve the country's ability to resist risks.
It is necessary to continue to deepen the supply-side structural reform and promote the industry to move towards the middle and high-end level; promote new urbanization and unleash the potential of domestic demand; Vigorously develop strategic emerging industries and cultivate new economic growth points.
At the same time, we must continue to open wider to the outside world and continuously enhance our ability to participate in the international circulation.
China should be highly vigilant against the United States' attempts to pass on the impact of the crisis on China through interest rate hikes and other means.
This round of interest rate hikes in the United States will intensify the pressure of capital outflows, suppress asset prices in emerging market countries, and thus pass on risks.
Therefore, China must be prepared to guard against systemic risks, maintain the continuity and forward-looking nature of macroeconomic policies, strengthen the resilience of industrial and supply chains, and ensure the safe operation of key areas.
China should vigorously promote the internationalization of the renminbi and get rid of its dependence on the US dollar.
It is necessary to increase the proportion of the global use of RMB in pricing, settlement, investment and financing; facilitating cross-border flows of RMB assets; Accelerate the opening up of the capital account and improve the mechanism for the formation of the RMB exchange rate.
The internationalization of the renminbi is conducive to resolving the "negative equity" characteristics of foreign exchange reserves, improving the efficiency of global resource allocation, and promoting the evolution of the international monetary system in the direction of diversification, thereby reducing the risk of being constrained by the US dollar system.
Only by calmly responding, adhering to economic development under "extreme pressure", actively preventing and defusing external risks, and promoting reform at home and abroad, can China truly get out of the predicament of relying on the US dollar and being constrained by the United States, and realize independent and controllable economic development.
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The U.S. economy grew by 1.6% in the first quarter, a marked slowdown in https://baijiahao.baidu.com/s?id=1797363173841014706&wfr=spider&for=pc
People's Daily Online: In the first quarter, China's economy made steady progress and "jumped hard" to achieve the expected target for the whole year https://baijiahao.baidu.com/s?id=1797107068293176198&wfr=spider&for=pc