A key indicator of wealth generation, and a nation’s competitiveness, is gross domestic product per capita. In 1978, China’s GDP per capita was $156, while the USA’s was $11,674. In 2019, China’s GDP per capita was $10,276 (lower than America’s in 1978), while the USA’s had reached $65,281. Though China’s GDP per capita increased approx. 65 times in the past 41 years, American GDP per capita increased even more, to $53,607. For every additional dollar China earned through its impressive development, the USA took home an additional $5. This additional GDP per capita is a direct and indirect consequence of China’s growth (Sources incl. World Bank).
How China has been made into a challenge
Why is such significant growth in China seen as a challenge to the USA, in particular to Trump and his administration? In his role as Secretary of State, Mike Pompeo delivered a speech at The Richard Nixon Presidential Library and Museum on July 23, 2020:
“We’re seeing staggering statistics of Chinese trade abuses that cost American jobs and strike enormous blows to the economies all across America, including here in southern California. …China ripped off our prized intellectual property and trade secrets, costing millions of jobs all across America….We, the freedom-loving nations of the world, must induce China to change, just as President Nixon wanted. We must induce China to change in more creative and assertive ways, because Beijing’s actions threaten our people and our prosperity.” (Source)
The key logic presented here by Pompeo, and also by other China Hawks, is: China must change according to America’s economic and political ideals. I propose that instead, they could be considering how they themselves might adapt or improve their own approach by learning from China’s successful development. Could this be a feasible solution to America’s challenges?
From my perspective as a global investor and businessman, it is an irrefutable fact that jobs have been lost in the USA, as a consequence of export driven growth in China (though this has, nonetheless, resulted in over 5 times more GDP per capita in America). But would these jobs, valued at around $10,000 GDP per capita in China, be sustainable or even desirable in America? How would the daily needs of a low-income population be met, without low-cost supplies, in sufficient volume, made in China?
In light of this, President Trump and his administration’s harsh decoupling from China is reminiscent of Don Quixote’s charging at windmills. If China truly were such a competitive challenge, or threat, when it comes to intellectual property theft, why would the American economy have earned an additional $5 GDP per capita, and why is Chinese GDP per capita in 2019 still lower than that of America in 1978?
America needs Chinese best practices to fight poverty
A free-market economy on both sides of the Atlantic gave America to access to the British Empire’s intellectual property, which was essential to the industrialisation of the American economy. Can America, suffering from both the Corona pandemic and income polarisation, now hope to hinder further Chinese integration into the globalised economy? Be it through the Eurasian silk road, or via free-market and open-trade, particularly on the Pacific West Coast? The 2020 trade war taught us a clear lesson: absolutely not. Since the fall of the British Empire, the UK has been able to achieve success by learning from American best practices, for instance in military and financial areas – through partnership, not confrontation.
China’s increased competitiveness from 1978 to 2020 is due to its economic and social governance system, and the related achievement of lifting much of its population out of absolute poverty. Surely there must be some best practices that could be applicable in the USA?
With Chinese business elites already spreading their presence privately and commercially throughout the entire world, would a more open Chinese society, that would likely sink into chaos and poverty, really be more desirable for the Western world? In addition to China’s business elites, should China’s economically disadvantaged population migrate towards America or even Western Europe, following the examples of e.g., Syria, Libya, or even the Ukraine? Perhaps China’s development is also favourable for the Western world, as it preserves its population of over 1,3 Billion inside China.
Instead of being declared as a challenge, China’s path should be appreciated and encouraged, and its best practices when eliminating poverty should be adapted by America.
A partnership between China and the USA would mean peaceful prosperity for all
Should China Hawks in America prevail further, China is likely to become a similar strategic threat to the American world order (as established after the WWII) as Russia was for Hitler’s Germany.
2021 should be a year of opportunity, where America recognises China as a possible solution for its domestic issues, instead of a challenge. Hopefully Biden and his new administration will be capable of this necessary strategic thinking and, eventually, depart from the hawkish China-approach favoured by Trump’s administration, which has so clearly damaged both American economic interests and global dominance.
One of the key drivers behind Tesla’s meteoric share price rise in 2020 has been investors’ past experience with VW, which became the biggest automotive OEM worldwide after successfully entering China. American think tanks and politicians should learn from these best practices sooner rather than later. Germany, for instance, has prospered from outsourcing manufacturing to China and similar GDP per capita jobs as Americans, successfully benefitting from market growth in China.
China is still a few decades behind America
In 1978, the year China started its efforts to learn from the Western world in terms of economic development, via an open society, market economy and private ownership, the GDP per capita in Germany was $9,482. After benefiting from China’s market growth, its GDP per capita reached $46,259 in 2019. (Source) The EU as a whole experienced similar benefits: from $6,044 in 1978 to $46,565 in 2019 (Source); the same can be said for France: from $9,265 in 1978 to $40,494 in 2019 (Source). For China, these facts mean collaboration with the Western world will be encouraged going forward, after its successful “touching stone for crossing river” efforts in the past four decades.
In the past 41 years, Germany, France and the European Union as a whole have undoubtedly achieved better employment growth than the United States, minimised income polarisation, and prevented even part of the population from falling into absolute poverty. China’s development and social governance in the next 41 years will easily integrate all the best practices of these advanced economies. Further development is inevitable, as it is even easier than in the past.
It took China over 40 years to achieve a similar GDP per capita to America and the entire Western world in 1978. China will now follow their best practices, leveraging e.g. South East Asia and the One Belt One Road initiative to further its development. When it comes to GDP per capita, China will soon be at the level of the United States, certainly in less than four decades. In these regions, America has been failing to enable economic growth by making use of their natural and human resources, and focusing on things like military intervention for political correctness instead of desperately needed infrastructure investments. Colonialization has never been a successful tactic when it comes to eliminating poverty, neither for the French or British Empires.
So why does the United States want to prevent China developing, instead of continuing to enjoy China’s growth in partnership, in order to better manage domestic income polarisation, global climate change and terrorism? It would be a much better option for America and the entire world, to work with China in peaceful partnership and benefit from its success.
This is my biggest wish for 2021.