Key Sources:
National Bureau of Statistics, "The National Economy Achieved a Good Start in the First Quarter", 2024.4.16
日经亚洲《China economy overtaking U.S.isincreasingly unlikely: ex-IMF offcial》2024.2.17
Preface
China's GDP has fallen to 59% of the United States, and American economists are once again singing about China's collapse.
Among them, American professors Prasad and Magnus argue; "The scenario where China becomes the world's largest economy may not happen, and the likelihood of China becoming the world's largest economy is declining."
So, is China's GDP really not catching up with the United States?
China's first-quarter GDP is released
Since the opening up of the mainland's economy, the mainland's economic speed has developed rapidly, like a carriage, carrying 1.4 billion people to move forward.
In just a few decades, the gap between China's GDP and that of the United States has continued to narrow, and China's GDP reached 77 percent of the United States at its peak.
Originally, according to the predictions of economists in the early years, China's GDP would surpass the GDP of the United States in the next few years, and it seemed that it was about to surpass the United States, but it suddenly seemed to "turn off the fire".
And after the GDP in the first quarter of this year (2024) is released, the GDP gap between China and the United States is getting bigger and bigger! What's going on?
In the first quarter of this year, the mainland's total GDP was 29.62 trillion yuan, which is converted into 4.17 trillion dollars, while the GDP of the United States in the first quarter reached 7 trillion US dollars, so China's GDP in the first quarter of this year was only about 59% of the United States.
According to the data released by the National Bureau of Statistics, the income of the mainland's primary industry, that is, agriculture, fishery and other natural resources, reached 1,153.8 billion yuan, an increase of 3.3 percent year-on-year.
The GDP of the secondary industry, that is, the mainland's industrial industry, reached 109846 billion yuan in the first quarter, an increase of 6.0 percent year-on-year.
The tertiary sector, which is all industries except industry and agriculture, also known as the service sector, reached 174915 billion yuan in absolute terms in the first quarter, up 5.0% year-on-year.
Not only that, the growth rate of the mainland's information transmission, software and information technology services industry has reached a year-on-year increase of 13.7%.
Therefore, the mainland's total output value in the first quarter of 2024 also increased by 5.3% over the same period of the previous year, which belongs to a state of rapid development.
Obviously, all industries in the mainland are growing, and GDP is also hitting new highs.
But why is the gap between China and the United States getting wider?
Reference source: National Bureau of Statistics, "The National Economy Achieved a Good Start in the First Quarter" 2024.4.16
National Bureau of Statistics, "The National Economy Achieved a Good Start in the First Quarter", 2024.4.16
Comparison of GDP between China and the United States in recent years
First of all, let's understand some of the changes in the GDP of China and the United States in recent years, and you can find some "catty" from it.
In 2023, the mainland's annual GDP will be 126 trillion yuan, an increase of 5.2% over the same period last year, and the average exchange rate for the whole year will be 7.04 US dollars, so China's GDP in 2023 will be 17.89 trillion US dollars in US dollar terms.
The annual GDP of the United States in 2023 is 27.35 trillion US dollars, so China's GDP only reached about 65% last year.
In 2022, the mainland's annual GDP will be 120 trillion yuan, a year-on-year increase of 3.0%, due to the epidemic, the economy has slowed down, but it is still in a positive growth state.
In 2022, the annual GDP of the United States will be 25.44 trillion US dollars, while China's will be 120 trillion yuan, which is about 70% of the United States in US dollars.
The peak of the mainland's GDP will occur in 2021, when economists in many countries around the world believe that China's GDP will surpass that of the United States in a few years, which is unanimously recognized by global economists at that time.
Therefore, the annual GDP of the mainland in 2021 will be 114.92 trillion yuan, while that of the United States will be 23.32 trillion US dollars, and China's GDP in 2021 will be 17.82 trillion US dollars, about 77% of the GDP of the United States.
Therefore, we can find that China's GDP was close to 80% of the United States from 2021, and only 59% of the United States in the first quarter of this year.
Therefore, in the past few years, the GDP gap between China and the United States has been widening, and the gap has even fallen by nearly 20% compared with 2021.
This seems to have something to do with the "70% curse" circulating internationally, that is, when a country's GDP reaches about 70% of the United States, the country will continue to be suppressed by the United States, and then the GDP will continue to decline.
In the past, the Soviet Union and Japan both reached about 70% of the GDP of the United States, and then the Soviet Union collapsed, and Japan was completely called the American wage earner.
So, is this the end of the situation in China, otherwise why would the gap get wider and wider?
Reference source: Chinese government website "How is China's economy in 2021? A Quick Look" 2022.1.17
Chinese government website "How is China's economy in 2021? A Quick Look" 2022.1.17
Why is the gap between China and the United States widening?
In fact, through the above data, I believe that some readers and friends can see some "catty", that is, China's annual GDP in 2021 will be 77% of the United States, which is equivalent to 17.82 trillion in US dollars.
After several years of growth by 5 to 6 percent, China's GDP in 2023 will reach only $17.89 trillion.
In other words, China's economy has been growing at a high speed for two years, but the GDP in 2023 when converted into dollars is actually the same as China's in 2021.
Therefore, this is the power of the hegemony of the dollar, the United States will raise interest rates through the Federal Reserve in 2022, and the Federal Reserve is the central bank of the United States, so the strategy of raising interest rates in the dollar will have an important impact on the global economy.
By raising interest rates in the U.S. dollar, the U.S. economy has been promoted, and the Federal Reserve has raised interest rates to prevent inflation and the economy from overheating, thus allowing the U.S. dollar to rise in interest rates, thereby attracting global capital to flow into the U.S. market, thereby making the U.S. dollar exchange rate rise sharply.
Another reason is the trade war launched by the United States against China, because the Sino-US trade has caused a shock to global trade, so many countries have begun to impose tariffs on American exports, which eventually led to an increase in the cost of American imports.
Because of the rise in the US dollar exchange rate, the price of imported goods in the United States is lower, thus alleviating the impact of the trade war on the US economy, which is one of the reasons why the US launched a trade war against China.
Another reason is that due to the recent global instability and the uncertainty of the global economy, the risk aversion of capital will gradually increase, and the US dollar is the common currency of the world, and the US dollar is still a relatively safe asset of the global economy.
Therefore, investors around the world will think that the choice of the US dollar will be called the main choice of investors to avoid risks, so when the market risk aversion is high, there will be a large amount of capital flowing to the US dollar, so the more people buy, the more valuable the US dollar, thus making the US dollar exchange rate climb steadily.
This is the power of the exchange rate, so the Fed raised interest rates and finally raised the US dollar from 6.3 yuan in 2021 to 7.3 yuan today.
Therefore, China's growth is not weak, China's economy has not regressed, but the exchange rate gap with the US dollar has widened, if the exchange rate between the RMB and the US dollar is converted to 5:1 in the early years, then China's GDP will instantly reach the same level as the United States, so this is the power of the exchange rate.
Therefore, for this digital gap, there is no need to study it at all, because it makes no sense!
In addition to this, there is also a fundamental reason, that is, the United States and China calculate GDP in different ways, in order to prevent China from surpassing the U.S. GDP, the United States has been revising the calculation method of U.S. GDP, and even such things as household output can be counted as GDP.
Although this calculation method is in line with the "System of National Accounts" standard designated by the United Nations, the method adopted by the United States does not directly reflect the true level.
The expenditure method used by the United States, the expenditure method of personal consumption, personal investment behavior, fiscal expenditure, and net exports will have an impact, and the disadvantage of this method is that the GDP data obtained by the expenditure method cannot reflect the economic situation of a country well.
Therefore, the use of the expenditure method is greatly affected by the willingness of the people to consume and the price of goods, so in general, the amount shown by the way the expenditure method is calculated is generally better than the real situation of the country.
Moreover, countries that use the expenditure method will be more prone to double counting, because the expenditure statistics are prone to duplication, so compared with the production method used in the mainland, the starting point for the GDP amount of the expenditure method is higher than that of the production method.
So, is it possible that China can overtake the United States if it does the same thing?
Reference: Globe Network "The Most Radical in Forty Years! The Federal Reserve raised interest rates by 50 basis points to end 2022" 2022.12.17
The most radical in 40 years! The Federal Reserve raised interest rates by 50 basis points to end 2022" 2022.12.17
Can China surpass the United States?
It is impossible to calculate whether China can surpass the United States, after all, if you count the GDP of the entire country in another way, this workload is very huge.
However, it is certain that the way the GDP of the United States is calculated is largely caused by the increase in consumption, and the inflation rate in the United States has remained above 8 percent, which means that prices in the United States have been growing rapidly.
Although soaring prices will lead to a decrease in the consumption level of the American people, it can make the US economic data look better and better, and through the "dollar interest rate hike" and "dollar printing", the US GDP will rise, and the exchange rate will be higher and higher, and the United States will also pay attention to the "finance" of the bubble, which will make the US GDP higher and higher.
As the world's largest industrial country, China's shipbuilding industry in 2023 will produce 42.32 million tons of annual tonnage, while the United States will produce 600,000 tons.
In terms of annual steel production, China accounts for more than half of the world's steel production, reaching 1.36 billion tons, while the United States has only 70 million tons, and China's power generation technology, not to mention, is the first in the world.
In the whole of last year, China generated 9.2 trillion kilowatt hours of electricity, and the United States 400 million kilowatt hours, more than twice as much as the United States.
Not only that, mainland also successfully won the world's first place in automobile exports last year, with an annual output of 30.16 million units, while the United States only had 10 million units.
China has much more data than the United States in various real economic and industrial levels, including air conditioners, refrigerators, mobile phone manufacturing, and electronic products.
In 2023, China's total industrial output will reach more than that of the G7 countries led by the United States, and even more than the United States in the agricultural sector.
Not only that, GDP is calculated by spending, and last year's inflation of 8.5% in the United States made GDP increase by trillions at once, and in this way, the United States will always be "very good-looking" in GDP.
What's even more rebellious is the "virtual rent", and the US GDP still counts this, that is, your rent is obviously not grouped, but the meaning is calculated into GDP.
Therefore, the United States, which has only 300 million people, can lead the world in GDP data, and if we also count the "virtual rent", then our five or six billion rural self-built houses are estimated to take off directly.
Not only that, but the natural economy of our large number of self-employed people, small vendors, and farmers is not included in the GDP at all, so China's GDP really cannot be compared with the United States.
Source: Sohu - Chinese Embassy in France "China's GDP will never catch up with the United States? 》2024.2.17
Sohu - Chinese Embassy in France "China's GDP will never catch up with the United States? 》2024.2.17
epilogue
Therefore, it makes little sense to compare the GDP of China and the United States without considering various factors. In recent years, the "digital wealth" that the United States has exchanged for interest rate hikes and high inflation has continued to attract global funds into the United States, and the U.S. debt is also expanding.
Therefore, we do not need to compare with the United States, engaging in industry, heavy industry, and high-tech is China's path!
Resources:
Sohu - Chinese Embassy in France "China's GDP will never catch up with the United States? 》2024.2.17
The most radical in 40 years! The Federal Reserve raised interest rates by 50 basis points to end 2022" 2022.12.17
Chinese government website "How is China's economy in 2021? A Quick Look" 2022.1.17
National Bureau of Statistics, "The National Economy Achieved a Good Start in the First Quarter", 2024.4.16
日经亚洲《China economy overtaking U.S.isincreasingly unlikely: ex-IMF offcial》2024.2.17