China Future

17 March, 2019

My boss’ boss who I like and respect bandied about a popular claim that China would suprass US GDP by 2030. This sounded lazily familiar so I tried to challenge him to a bet in the elevator but he demurred Still open to giving some one 2:1 odds that China will not surpass US GDP. Let me lay out an argument.

Reasons for china pesimism.

Population: a huge part of gdp is actually raw population. While the US has obviously not in a baby boom it at least allows some immigration offset. China’s seems to be trying to rollback the the one child policy but is not having much success. Sometime in the 2030-40’s chinas population should invert with more old to support than young to support them.
Catch up growth / historical precedent: Remember the 80’s Japan was going blow right past us? Go watch some 80’s movies/sci fi. Zaibatsu were unstoppable. Turned out Japan was doing alot of catch up growth and now they dominate some industries but not everything like it seemed at the time.
Rising costs: turns out a prosperous people start valueing thnings like a better environment, leisure time, and more consumption goods. Already real-estate prices skyrocketed and there’s a parallel to that in Japan.
State sponsered entities: Some people see this as a positive but I think overtime these enities will rot and it will be too hard policically to let them be replaced. So while Baidu, Tencent, Hauwei, Alibaba seem new and fresh now how will they do in 20 years.
The great firewall of china: Long term this makes china dumber and bottles up resentment.

Reasons for china optimism

Sci fi! Cixin Liu in particular. I was impressed by Three Body Problem but the short story anthology wandering earth. There is just so much optimism and confident in china’s ability to change the world. It is very remeniscent of 50/60’s scifi. In particular china sun is an everyman conquering the solar system that felt very american.
Can do attitude. Some of the infrastructure china is amazing. Part of this is disregard for individuals that goes hand in hand with a low red tape infra.
U.S. Trade policy is dumb and lets china get cement a lop of econimic allies (TPP failure for example)

Numbers.

Current GDP figures

China 13 trillion at 6% 13.4 *1.06^10=23.99

US 24 trillion at 2% 20.4 *1.02^10=24.86

So I am betting china will average < 6% or the us will average > 2% (mostly the former)