When will China's GDP surpass that of the United States?
Over the past 40 years, China's economic development has created one myth after another, not only becoming the world's second-largest economy in one fell swoop, but also its GDP has once caught up to 80% of that of the United States.
However, now the gap between China and the United States has widened again, and it is even lower than the level of six years ago.
What's going on? Why has the gap between China's and the US's GDP not decreased but increased? Has the rise of a great power really been interrupted by the United States?
Danger? China's Q1 GDP drops to 59% of the US
The smallest gap between China and the US's GDP was in 2021, when China's GDP was $17.82 trillion, accounting for 77% of the United States.
Advertisement
However, over the next two years, this figure gradually decreased, 70%, 65%, and the peak period seemed to have passed forever.
By the first quarter of this year, China's GDP was $4.17 trillion, while the US GDP reached $7.07 trillion for the same period, and the proportion fell below the "passing line" to only 59%.
Seeing this, the American media was overjoyed, bluntly stating that "China's GDP surpassing the United States by 2030" is a joke, and even clamoring that "China will never be able to surpass the United States."For a time, the notion of the "70% curse" became prevalent, leading many to believe it as the truth.
What does the 70% curse mean?
In fact, this idea has been around for a long time. Simply put, it means that when a country's GDP reaches 70% of the United States', the U.S. will use various means to restrict its development until it is completely suppressed into the abyss, never again posing a threat to its hegemonic status.
At first glance, the 70% curse seems to have some merit: on one hand, the former Soviet Union and Japan serve as cautionary tales. One has vanished into the annals of history, while the other has become a follower of the United States, with the U.S. as the undisputed leader.
On the other hand, since 2018, when China's GDP accounted for 68% of the United States', the U.S. has begun to pursue and block us from all aspects, including trade, finance, and technological blockades, in an attempt to prevent China's rise.
But upon closer examination, is China's strength today equivalent to that of the former Soviet Union and Japan?
Is the United States today still as vigorous as it was in the past?
Is the 70% curse reemerging?
To address the question of the 70% curse, we must first understand why the gap between China and the U.S. in GDP has been gradually widening.
As we all know, since 2022, the Federal Reserve has initiated the current interest rate hike cycle, and the expectation for a rate cut has been repeatedly postponed.The reason for the slowdown in China's economic growth and the widening gap between China's and the US's GDP is primarily due to this factor.
Under the Federal Reserve's interest rate hikes, the US dollar has continued to strengthen, while the Chinese yuan has passively depreciated, even breaking through 7.3 at one point.
However, if we rewind the timeline to 2022, before the Federal Reserve's interest rate hikes, we would find that not only has the gap between China's and the US's GDP not widened, but it should have actually narrowed.
This is a very simple calculation:
In 2022, the exchange rate of the Chinese yuan to the US dollar was 6.3048. If calculated based on the exchange rate at that time, China's GDP would have already exceeded 80% of the US's, even higher than the proportion in 2021.
In other words, it is the continuous interest rate hikes by the US that have led to the depreciation of the Chinese yuan exchange rate, indirectly widening the gap between China's and the US's GDP, but it does not reflect the true situation.
In fact, the Federal Reserve's interest rate hikes stem from the persistent domestic inflation problem. Even after more than two years of interest rate hikes, the inflation dilemma has not only not been resolved, but there is also a trend of making a comeback.
This high level of inflation has also indirectly increased the nominal GDP of the United States.
Now, let's return to the issue of the 70% curse. Does the 70% curse really exist?
The answer is obviously no. Regardless of how tragic the outcomes were for the Soviet Union and Japan at the time, it can now be affirmed that the 70% curse has not occurred in China.On the contrary, in recent years, the development speed of China's economy has been evident to all, while the United States is facing a series of problems such as the soaring scale of U.S. debt, high inflation, and the imminent financial system crisis.
As the Federal Reserve ends this round of interest rate hikes and begins to lower interest rates, the dollar weakens and the yuan strengthens, the gap between China and the United States' GDP will be rapidly narrowed, and the so-called 70% curse will naturally collapse without being attacked.
Has the rise of a great power really been interrupted?
In fact, speaking of this, the answer to this question is already clear:
Not only has it not been interrupted, but it has also been accelerating.
To be honest, due to the interest rate hikes in the United States, the global economy has also suffered a significant impact in recent years, with a sharp decline in demand in Europe and the United States, a large reduction in orders, shrinking exports, coupled with a cooling domestic consumption, China's economy is inevitably affected.
But as a major global trading country, we have achieved fruitful results under in-depth reforms.
For example, foreign trade, one of the three driving forces of the economy, our export products have undergone earth-shaking changes, and the "new three (new energy vehicles, photovoltaics, lithium batteries)" have become the new pillars of foreign trade.
Especially among them, new energy vehicles, China's current automobile export volume has already become the world's first, and the automotive industry has contributed a great deal to China's industrial transformation and upgrading.
After getting out of the painful period, industrial upgrading has achieved visible results.In contrast, the United States, even to this day, still relies on the old approach of "strong stimulus" to drive the economy. Apart from massive monetary easing, it also raises interest rates to reap global benefits, transferring its own crises onto the world, which has been widely criticized.
Perhaps in the short term, the U.S. economy, like a blazing fire frying oil, does indeed perform brilliantly. However, it's important not to forget that the current U.S. national debt has reached nearly $35 trillion, and interest rate hikes cannot continue indefinitely.
This implies that, in the long run, the gap between China's and the U.S.'s GDP will only continue to narrow. China's rise has not been interrupted; it is still accelerating at a furious pace.
In conclusion:
Objectively speaking, there is indeed a certain gap between China and the U.S. in terms of GDP. However, it is clearly illogical to conclude that China's rise has been interrupted merely by playing some "number games."
Instead of competing for a moment, we should strive for a legacy that lasts for ages. The Chinese economy is bound to soar, and we might as well wait and see.