China overtakes US as world’s biggest economy

panda eagleThe World Bank has noted that China has quietly overtaken the United States as the world’s largest economy.

Washington is responding to this in exactly the wrong way—by trying to checkmate China’s power rather than rebuilding the sources of American power.

China already led the United States in a number of important respects.  According to the CIA World Factbook, it exceeds the United States in industrial output, in agricultural output and in electricity production.

While China had a $260 billion trade surplus in 2013, the USA has a $698 billion trade deficit.

It is true that while the Chinese nation is rich, the Chinese people are still poor compared to Americans—not just in the amount of stuff they own, but in terms of infant mortality, life expectancy, literacy and access to public water and sewerage systems.

Inequality and concentration of wealth are just as great in China as they are in the United States.  China is the world’s largest polluter overall, although the USA is the largest on a per-capita basis.  Interestingly China has a lower birth rate and population growth rate than the USA.

But life has been getting better on average for the average Chinese person, while the earning power of the average American has been slipping behind.

The United States has the world’s largest and most expensive military, but the Chinese may be a match for the USA in their own backyard—the South China Sea.

Joseph Stiglitz, former chief economist for the World Bank and former chairman of the President’s Council of Economic Advisers, argued in a recent article that the USA still has great residual strength, but American leaders are letting it slip away by concentrating on military dominance and corporate profits at the expense of everything else.

In a full-fledged Cold War between the USA and China, China is in an economic position to do the USA great damage.  China could stop buying U.S. Treasury bonds, for example.

It’s not in the interest of China to wage economic war against the United States.  Both sides would suffer.  American leaders should not push China into a corner and put its leaders in a position in which they think they have no choice.   Instead American leaders should concentrate in reducing US economic vulnerability.

China does have big problems—inequality, pollution, corruption, unrest among workers and among minorities in Xinjiang, Tibet and elsewhere.

Maybe these problems will be fatal, although I doubt it.  But these are not issues the United States can affect one way or the other, or should try to affect.

And if China should start to collapse, history has many examples of declining empires that try to restore internal unity by going to war.  This is not something we Americans should hope for.  Our problems originate at home, not in China.


China Has Overtaken the United States as the World’s Largest Economy by Joseph Stiglitz for Vanity Fair.

China vs. United States from the CIA World Factbook.

G-Zero: US-China Relations in the Age of Xi by Peter Lee for China Matters.


3740Hat tip to my expatriate e-mail pen pal Jack for the next five links.

Smoking set to kill one in three young Chinese men as country faces ‘epidemic’ by Agence France Presse.

Air pollution in China is killing 4,000 people every day, a new study finds by the Associated Press.

U.S. naval maneuvers in South China Sea risk clash with Beijing by Tom Phillips for The Guardian.

 Japan joins with former foes to flex its muscles as it eyes China’s rise by Oliver Holmes for The Guardian.

Cheap Goods From China Have High Carbon Cost by Christopher Intagliata for Scientific American.


‘A brighter future beckons’: China tries to get Xinjiang to join the party by Tom Phillips for The Guardian.

The ‘World’s First Driverless Bus’ Takes to the Road in China by John Metcalfe for The Atlantic’s CityLab.


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One Response to “China overtakes US as world’s biggest economy”

  1. Nick Johnson Says:

    Thanks for your post on China. With a population of 1.3bn compared to less than a third of that in the US, China’s economy ‘catching up’ and overtaking had been coming for some time. China is now going through an economic slowdown, and the structure of its economy is shifting from one based on huge investment in manufacturing and infrastructure towards a higher proportion of consumption on the demand side and services on the supply side of national income. Surely China has been the most spectacular example of rapid development in history, given its population size, and it has had a huge effect on everything from world trade, commodities prices, global inflation, to pollution, as you mention. I remain optimistic that the state will be forced to move towards a more democratic model at some point in its development path, but making predictions as to when is a mug’s game!


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