CHINA WATCHWill China's Economy Ever Overtake the U.S.'s?

By Nik Martin

The idea of China’s outstripping the United States to become the world’s largest economy has been a fixation for policymakers and economists for decades. What will happen, they argue, when the US — one of the most dynamic, productive economies — is usurped by an authoritarian regime with a three-quarters-of-a-billion-strong workforce?

Predictions of when exactly China would steal the US’s crown have come thick and fast ever since the 2008/9 financial crisis, which hampered growth in the United States and Europe for many years. Before what became known as the Great Recession, China saw double-digit annual gross domestic product (GDP) growth for at least five years. In the decade following the crisis, China’s economy continued to expand by 6%-9% annually. That is, until COVID-19 struck.

As if the pandemic — which led to strict lockdown measures that brought the economy to its knees — weren’t enough, the Asian powerhouse was also plunged into a real estate crash. At its peak, the property market was responsible for a third of China’s economy. However, rules introduced by Beijing in 2020 put limits on how much debt property developers could take on. Many firms went bankrupt, leaving an estimated 20 million unfinished or delayed homes unsold.

Around the same time, declining trade relations with the West also weakened growth in the world’s second-largest economy. Having encouraged China’s ascendancy for decades, by the late 2010s, the US shifted to containing Beijing’s economic and military ambitions, if only to delay the inevitable advance.

Has China’s Economy Peaked?
The apparent change of fortunes for the Chinese economy was so stark that a new term emerged about a year ago: “Peak China.” The theory was that the Chinese economy was now burdened by many structural issues, such as a heavy debt load, slowing productivity, low consumption and an aging population. Those weaknesses, along with geopolitical tensions over Taiwan and a decoupling of trade by the West, sparked speculation that China’s impending economic supremacy may be delayed, or never happen.

But Wang Wen from Renmin University of China’s Chongyang Institute for Financial Studies told DW that the notion of Peak China was a “myth,” adding that China’s total economic output reached almost 80% of the US output in 2021.

Wang said that as long as Beijing maintained “internal stability and external peace,” the Chinese economy would soon overtake the US. He cited the desire of millions of rural Chinese to move to urban areas, where earnings and quality of life were reportedly much higher.