For decades, China has seen relentless growth in power and economic prosperity. But there are growing signs that the economic miracle has ended and that the path to further growth in the years ahead will be more difficult.
But does that mean China has lost its chance to ever overtake the United States? Here's a closer look.
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China’s growth model
China’s gross domestic product (GDP) per capita, adjusted for inflation, surged from $293 in 1985 to more than $12,000 in 2021. Demographics, exports and capital investments made this economic miracle possible.
China’s enormous population — which was the largest in the world until India’s recently surpassed it — served as cheap labor for assembling goods that were exported aggressively. Meanwhile, the government invested heavily in infrastructure to support this export-led growth model and boost standards of living.
However, China’s economy has shifted from export-centric to a consumer-led, debt-fueled model in recent years. This model is now at risk. As of July, China's imports and exports had fallen quicker than expected as demand softened.
Uphill battle ahead
China’s recent trade tensions with the U.S., which kicked off under the previous administration and have continued under President Joe Biden’s, have disrupted a trading relationship that was integral to the economic “miracle” of the past four decades or so.
Meanwhile, wages have been rising rapidly, according to the country’s own National Bureau of Statistics, thus narrowing the gap between Chinese workers and rivals in other markets. Consequently, China reported that its exports were down 14.5% year-over-year, as of July. Earlier in the year, Beijing said its economy had grown by only 3% in 2022, the slowest pace since the mid-1970s, not counting 2020, the first COVID year.
While China's GDP has risen to 5% in 2023, the country's potential troubles don't end there.
Not only is China no longer the world’s most populous country; it’s actually seeing population decline that could, according to UN estimates, see the country’s population fall to less than a billion by 2080 and then less than 800 million by 2100.