Are we destined to live in a Chinese century?
55 years ago, the US forced Britain to withdraw from the Suez canal zone by threatening to withhold financing. British Prime Minister Harold Macmillan quipped, “perhaps in 200 years you will know how we felt.” Some think it could take much less time. Might China become fed up with US support for Taiwan, and threaten to withhold financing from our Treasury market if we don’t reduce our presence in the Pacific?
A recent study forecasted global trade, economic growth, and credit conditions through the year 2030. The conclusion was sobering: if current trends continue, China will be the dominant factor in global markets within two decades. Its economy will comprise 20% of global GDP; its per-capita income will grow from 15% to half our level; and it will generate 15% of world trade—double that of the US.
But as Yogi Berra once said, it’s tough to make predictions, especially about the future. Analysis like this assumes that there will be no banking crisis in China, no civil strife, that their outward-looking export-oriented economic policy will continue, that the rest of the world will have an unabated appetite for Chinese goods, and that no rival power with cheap labor and deep ports will arise to take China’s place as the world’s cheapest place to make things.
All these assumptions are open questions. China has been liberalizing its economy 30 years, but nothing is inevitable. China’s economy will likely grow quickly as their society develops. But there will probably be some bumps along the way.