‘Peak China’ narratives misplaced

Theories of the nation’s growth hitting a wall and its likely ramifications are wide of the mark

There is a popular Western perception that China’s continuous rise is no longer “unstoppable”, due to markedly slower growth rates, rapidly aging demographics, semiconductor bottlenecks, allegedly more constrained innovative capacity, feeble productivity increases and more hostile external geopolitics.

An article in The Economist on May 11 asked, “Is Chinese power about to peak?” — highlighting Goldman Sachs’ much lowered expectation of China’s economy overtaking that of the United States by 2035, as well as a gloomier forecast by Capital Economics, a research firm, that China may never be able to overtake the US economy, and that it would instead peak at 90 percent of the size of the US economy by 2035.

As China has four times the population of the US, this pessimism presupposes that China’s per capita productivity will never exceed onefourth that of the US.

The Economist flagged up, without agreeing, the alarmist warning of US academics Hal Brands and Michael Beckley that a “peak China” that is “facing decay” may well go to war to unify with Taiwan preemptively, before it is too late, regardless of three white papers reaffirming Beijing’s preference for peaceful unification.

Drama aside, these “peak China” musings are wide of the mark.

It is only natural that much larger and more mature economies beget more moderate growth rates. Just look at the advanced Western economies, including the US.

After decades of breakneck GDP growth that was once described as “unstable, unbalanced, uncoordinated and unsustainable”, China has been pursuing higher-quality, socially equitable and ecologically sustainable growth.

With an imperative for “common prosperity”, China’s people-based governance is geared toward realizing the well-being of the 99 percent, instead of the 1 percent elite as in some advanced countries.

Worsening demographics are a real challenge. However, about onethird of the 150 million Chinese people aged 60 to 69 continue to work, as China’s life expectancy has vastly improved.

Relaxing China’s mandatory retirement age is already on the cards, as are greater financial incentives, childcare facilities and other child-raising and educational benefits.

Instead of labor intensity, China’s productivity is increasingly being driven by factory robotics, extensive farming mechanization and ubiquitous digitalization.

As for innovative capacity, an Australian Strategic Policy Institute report said on March 3 that China is leading in 37 of the 44 critical technologies evaluated, often producing more than five times as much highimpact research as its closest competitor, the US.

Among the categories of critical technologies, China dominates in all the subsectors in advanced materials and manufacturing; energy and environment; and photonic sensing, timing and navigation. It has a substantial lead in the categories of artificial intelligence, computing and communications; quantum computing, cryptography, communications and sensors; biotechnology, gene technology and vaccines; and defense, space, robotics and transportation.

All these technologies are at the heart of the fourth and fifth industrial revolutions.

China’s technological dominance is not surprising. Since the mid2000s, the country has consistently been producing more PhDs in science, technology, engineering, and math than the US. By 2025, Chinese universities will be producing more than 77,000 such PhDs per year, compared with approximately 40,000 in the US.

In the face of indiscriminate US tariffs and denial of technological access, China has proved its economic resilience as the world’s largest trader and manufacturer, and it is deeply embedded in global supply and value chains, including critical rare earth elements. It is instructive that a US-led push for “decoupling” has now been changed to “derisking”.

The Regional Comprehensive Economic Partnership, which comprises members of the Association of Southeast Asian Nations and their main trading partners, including China, Japan, South Korea and Australia, is now the world’s largest and most dynamic trading group, representing one-third of the world’s population, one-third of the global economy and a vast number of the world’s middle-income consumers. As the most comprehensive trader and manufacturer, China is at the economic heart of the RCEP.

Weaponizing the dollar to impose sanctions across the globe has now boomeranged, as expounded in

Backfire: How Sanctions Reshape the World Against US Interests, by Agathe Demarais.

There is now a strong “de-dollarization” undercurrent among various developing country groupings such as BRICS (Brazil, Russia, India, China and South Africa) and the Shanghai Cooperation Organization, not to mention China’s rapidly developing digital yuan as an alternative currency for global trade.

Following the end of the prolonged COVID-19 pandemic, foreign businesses and investors across the globe are beginning to make a beeline for China.

China is actively preparing for domestic reforms, having applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, mandating higher international standards.

Perhaps where the so-called “peak China” mantra seems most wrongfooted is its assumption that China wants to surpass and supplant the US as world hegemon. President Xi Jinping has repeatedly stressed that striving to be a “strong, democratic, civilized, harmonious and modern socialist country” does not translate into seeking world hegemony.

Initial Western suspicion notwithstanding, China’s Global Security Initiative seeks to promote dialogue over confrontation, partnership over ganging-up alliance, and win-win coexistence over a winner-take-all, zero-sum conflict. Meanwhile, the Global Development Initiative is intended to remedy the developing world’s lack of infrastructural connectivity, bringing better lives to their peoples and fulfilling the United Nations’ Sustainable Development Goals.

The author, an international, independent China strategist, was previously the Hong Kong Special Administrative Region’s directorgeneral of social welfare and the SAR’s official chief representative for the United Kingdom, Eastern Europe, Russia, Norway and Switzerland. The views do not necessarily reflect those of China Daily.