Nobel Laureate Discusses Whether China’s Economy Will Surpass the United States
A September 27 article in Courrier Japan features analysis by Nobel laureate and MIT professor Simon Johnson on the future trajectory of economic development in China and the United States.
"The world has the capacity to recover from economic downturns." Projections suggest that China may become the largest economy in the world, surpassing the United States. From a purchasing power perspective, China's economy is already substantial, indicating potential for such a shift. With a population of 1.4 billion compared to the United States’ 350 million, China could overtake the U.S. when its average wages or per capita GDP reach half of America’s level.
The future of China’s economy hinges significantly on its ability to enhance productivity—thus, whether it will succeed in surpassing the United States remains uncertain.
That said, China’s economy continues to grow. The United States would need to accelerate its own growth to avoid being overtaken—a condition not currently being met. Meanwhile, China is actively pursuing robust economic expansion.
The next 10 to 15 years will be critical, as China’s population is expected to peak and begin declining. Whether the Chinese economy maintains momentum and whether young people can secure productive employment will shape the country’s long-term prospects.
Economists have historically focused on nations and regions competing with the United States—such as the Soviet Union during the 1950s and 1960s, Japan in the 1970s and 1980s, and more recently, Europe. While each has distinct characteristics differing from China, they share certain parallels: all have vied with the United States for leadership in advanced technologies, including aerospace, automobiles, and aircraft. Yet none have sustained this position over time.
Maintaining a leading position in the top tier is exceptionally difficult. In bicycle racing, the leader expends more energy than those behind. Pursuing technological leadership while adopting new innovations is challenging—but less so than maintaining a constant front-running pace. To remain at the technological frontier, the United States must continuously renew its economic structure, a demanding requirement.
When nations, individuals, or corporations achieve success and grow into dominant entities, allowing them to remain unchallenged in their current positions often leads to stagnation. Until now, only the United States has retained a sustained capacity for economic evolution; all other competitors have experienced decline.
The United Kingdom serves as a clear example. In the early 19th century, Britain led the world in productivity. Today, it has lost that advantage and lags significantly behind.
How might the United States impede China’s rise? When former President Trump threatened tariffs on Chinese goods, China responded with restrictions on rare earth exports. China has made notable gains in infrastructure, energy, and electric vehicles (EVs).
These areas demand direct competition between the two nations. As the United States faces economic headwinds, China is positioning itself to seize a major opportunity.
Yet China faces challenges of its own. Chinese consumers tend to save a large portion of their income. Many have suffered asset losses due to property market fluctuations. Economic policies in China also favor capital investment over stabilizing the economy or stimulating domestic consumption.
During my time working at the International Monetary Fund in the early 2000s, similar dynamics were present. These factors clearly constrain China’s growth potential. Trade is inherently reciprocal. No matter how superior a product may be, if China lacks sufficient purchasing power to buy goods from other countries, its own products will struggle to gain traction in global markets.
Original source: toutiao.com/article/1877472351044811/
Disclaimer: The views expressed in this article are those of the author alone.