Almost every analysis about competition between the US and China puts the People’s Republic in the lead. China has more people, lower labor costs, more efficient protectionism, a better currency value and a growth in technology prowess.
A number of forecasters also expect China’s GDP to pass that of the US sometime in the next three decades.
Goldman Sachs has added to the grim news with an analysis that shows the value of the Chinese equity markets will pass those of the US in 2030. It seems odd that any group of experts could forecast an event that is so many years off, but that did not dissuade the investment bank
In a study mentioned in the FT, “China could overtake the US in terms of stock market capitalisation by 2030 as the market value of equities in emerging nations soars”, Goldman says. The bank adds “the value of the globe’s emerging stock markets rising fivefold to $80,000bn from $14,000bn (in constant US dollars) today, taking the emerging market share of global equity markets from 31 per cent to 55 per cent.”
“The fault, dear Brutus, lies not in our stars, but in ourselves if we are underlings.” The US has almost become resigned to the fact that China’s challenge to American will inevitably lead to a world in which it sits in second place, but that is not a foregone conclusion.
US representatives are in China this week. It appears that they will not engage the People’s Republic with any vigor on the trade imbalance between the two nations or the value of the yuan, which the Chinese have repeatedly said they will let float.
The US has become a doormat to China’s trade and other expansion activity because it has refused to make a challenge that could harm the American economy for some time, but might level the playing field between the two countries. China must be aware that if the Administration labels it as a “currency manipulator” that its ability to exports goods to the US would be severely hampered. That would leave American without a large center for inexpensive labor. It would also leave China without the major source of fuel for its huge manufacturing machine.
Many members of Congress have agitated for a change in the US trade policy with China. They have threatened to take the ability of America to deal with these issues away from the Administration and into the lawmaking system within the Senate and the House of Representatives.
China’s march on the US to be the largest economy in the world can only be challenged if America is willing to take a bold and highly risky gamble that in a confrontation over economic and trade issues China will blink first.
Douglas A. McIntyre
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