Is China going to replace USA soon enough?

If one carefully glances through the newspapers of the last week or so, it is not uncommon to notice that the source of the pandemic, China, is now emerging and scaling new peaks. So, China is now emerging as an economic superpower and it might appear that it may overtake the USA soon enough. As per the report of CNN, about 2.3 % contraction (to 20.93 trillion dollars) was observed in the USA economy. On the other side, China has actually experienced an expansion in its economy to an extent of about 14.7 trillion dollars. Similarly, China’s exports enhanced by the proportion of 32 %.

But is this really going to materialize? This requires some latent observations to the least.

Primarily, both the economies are experiencing a far wider inequality than that was the case in the earlier scenario. As per the Gini coefficient, China’s inequality stands at about 0.474, which is quite high in real terms. Though the inequality in the USA does not shows very encouraging results, but the linchpin here is the fact that the inequality is high in the former as compared to the later If we consider the reports of the National Bureau of Economic Research. It is relatively lesser inequality, that actually will come to the rescue of the American economy. China’s economy is really a cause of concern keeping in mind the complex political structures of the state and the less democratic nature of the nation.

Further, both the economies not only composed a major share of the international trade, but at the same time, both the economies work not mutually exclusive to each other rather, they tend to work supplementary. Take, for instance, China, which holds the greatest export value worldwide ( $2499 b), and the USA, on the other hand, holds the maximum import value (to the tune of about $2568 b). Keeping these things in mind, it is not uncommon to deny the fact that both economies need the support of each other, at least, for the next decade or so. So, no country can afford the phenomenon of ‘plummeting’ in another economy.

Technology, as Yuval Noah Hariri in his famous book ‘ 21 Lessons for the 21st Century’ rightly mentions the increasing influence of technology like artificial intelligence on human life. USA investment is humongous in the field of science and technology, unparalleled to any other nation in the world. Take, for instance, Coinbase Global Inc, the largest US cryptocurrency exchange has initiation its trade in the stock market long back unlike any other nation in the world.

No doubt that the Twenty-first century will be going to be ruled by innovations. Even the very concept of economics rests greatly upon the theme of innovation. Adam Smith proposed a theory of ‘free trade’ (an innovation) in opposition to those of Mercantilism. Likewise, Keynes proposed ‘ Demand-side’ and controlled economy, another innovation, that superseded the earlier theories during the era of the great depression. Therefore, in the same way, new theories in the form of innovations will arise in due course of time. As per the Global Innovative Index, USA stands at third position, whereas China did not even find its spot among the top ten. So, the higher the innovation, high will be the economic growth by manipulating the earlier theories.

Finally, the geopolitical situation of the world stands in favor of the USA in comparison to that of China. No economic policy stands in isolation, and it works in tandem with the other socio-political situations and conditions, and in this scenario, the USA leads among other nations.

Keeping all the above-mentioned points in mind, the veracity of the theory of economic dominance of China over that of the USA, demands and even lingers for another comprehension, this time, at a deeper level.

About the author

vipal

My name is Vipal Bhagat, going to be doctorate in applied economics. My aim is to analyse and interpret the current economic happenings around us, according to the core and basic principles of economics.

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