China's 99% -- Why China Will Not Surpass the U.S.

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China's 99% -- Why China Will Not Surpass the U.S.
The received wisdom these days is that the West is in rapid
decline, and China is on an upward trajectory that cannot be
stopped. Sooner or later the pundits say, the two lines will
cross-- perhaps explosively-- and China will rule the world.
The latest evidence? Klaus Regling heading to Beijing on
Friday to beg for Chinese financial aid to rescue Europe. It is
certainly a long way from the foreign treaty ports and other
indignities that China suffered at European hands in the last
century... I wonder if there is a Chinese word for
schadenfreude?

I might have contributed modestly to the momentum
theory of China's ascendancy myself with the 2003 article that
David Hale and I wrote for Foreign Affairs, China Takes Off.
To say that China is rising is one thing however, because that
is undoubtedly true. To say that China will rule the world is
quite another.
An amazing number of Americans who were polled
recently incorrectly believe that China's economy is already
bigger than the US. The view from inside China is somewhat
different. As any thoughtful person there will attest, China
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faces a slew of obstacles at this stage of its development. China
might be a rich state, but its people remain poor. China may
become the world's largest economy in 2016 according to
optimistic estimates by the IMF, but that simply means that
total output will be larger than in the US. A country with 1.3
billion people should have an economy larger than one with .3
billion in absolute numbers: China's population is more than
four times larger. If both economies were exactly the same size,
China's GDP per capita would be just 25% compared to the
US.

What this means is that in spite of the overall size of its
economy, the standard of living in China is correspondingly
lower. Just one example to put this into perspective: only 20%
of Chinese people have flush toilets. The inescapable fact is
that a world in which Chinese consume at the same rate as
Americans is a world that cannot exist, based upon available
resources of food, water, energy, and other commodities and
products such as cars. It would require by some estimates four
plant Earths. There is a natural limit to Chinese consumption
simply because there are so many Chinese people. This might
be unfair, but it means that the great majority of Chinese will
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not be able to enjoy the kind of life we live here in the US
absent exponential and unforeseen technological progress.
Demographics play a crucial role in terms of limiting
Chinese growth and economic prosperity. China's population,
similarly to Japan, is getting older. The difference is that the
Chinese are not going to be as rich as the Japanese by the time
that much of their population is over the age of 65. By 2040,
assuming current demographic trends continue, there will be
about 400 million Chinese elderly with fewer descendants to
take care of them than in previous generations. According to a
report by CSIS, The Graying of the Middle Kingdom instead of
the current ratio of 6:1 working adults to elder dependents, by
the middle of this century there will only be about 1.6 working
adults for each elder. Due to the lack of job-related and
government pension funding the end result will be that
China's savings, upon which her wealth has been built, will
erode. China faces a steady decline in its workforce beginning
mid this decade, thanks to the One Child Policy.
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The elderly are also major consumers of health care
services. The United States is the richest nation on earth, and
has positive population growth, but we are still worried about
being able to take care of our baby boomers in the future. In
today's China, healthcare is at a premium, and many people in
the countryside cannot afford any medical treatment-- full
stop.