China's economic rise continues to defy pessimistic predictions

Editor's note: Decision Makers is a global platform for decision makers to share their insights on events shaping today's world. Paulo Nogueira Batista Jr., a Brazilian economist, is the former Vice President of the New Development Bank (NDB) and former Executive Director for Brazil and other countries in the International Monetary Fund (IMF). The article reflects the author's opinions and not necessarily the views of CGTN. 

China's decade-long economic rise continues unabated, despite the ill-will and pessimistic predictions of a sharp slowdown and even a crisis, coming from Western institutions and economists. And, more importantly, despite the economic sanctions and political pressure applied by the United States in recent years, the Chinese economy remains remarkably resilient. It has slowed down but is still expanding at an appreciable pace of about 5 percent per year. Betting against China has proven an ill-fated endeavor.

Take for instance data on recent economic performance and the short-term predictions by the IMF. What stands out is that China's GDP growth continues to exceed that of the high-income countries by a considerable margin. In 2023, China's economy grew by 5.2 percent in real terms compared with 2022, while developed economies, by 1.6 percent. For 2024, the IMF forecasts a moderate slowdown in China, to 4.6 percent. High-income nations are expected to grow by 1.5 percent. China's GDP growth was higher than that of other emerging market and developing countries in 2023 and, thus, China's share of the world economy rose again, to the dismay of those who projected or wished for a reversal of this trend. This reversal may yet happen someday but it is not on the horizon. Short-term projections published by the IMF, for instance, still show China rising relative to the rest of the world.

Historically, relative economic size has always been a key factor behind national power. The U.S. is acutely aware of this. It sees China as its main competitor, even its enemy. It can be said, in my view, that China was not seeking a confrontation with the West. China seems to have believed, or hoped, that it would continue on the peaceful rise initiated in the last decades of the 20th century. To no avail. The rise could be peaceful if and only if it did not threaten to displace the U.S. from its cherished dominant position. In the last decade or so, the U.S. came to perceive this possibility as a real one.

Wishes clashed with reality, as they often do. Whether Americans accept it or not, the U.S. is no longer the unchallenged nation and the largest economy. China's GDP, measured on a purchasing power parity (PPP), has been, for a decade, larger than that of the U.S. On a PPP basis, China currently represents about 19 percent of the world economy, while the U.S., around 15 percent. Per capita GDP is much higher in the U.S., but in terms of absolute economic size China has overtaken the U.S. 

If the benchmark is market-exchange rate based GDP, the size of the U.S. economy is still larger than that of China, given its higher level of economic development. However, this yardstick, though often preferred in the Western media, is misleading. This is because exchange rates are volatile; they fluctuate in nominal and real terms, often sharply. By definition, market-exchange rate based GDPs rise and fall, reflecting these fluctuations. If a currency appreciates, the countries' GDP measured in dollars increases. These variations have little to do with actual real economic growth.

Those who are not acquainted with American mentality may find it a little strange, even childish, that such rankings are a matter of concern in the U.S. However, since the first half of the 20th century, when the U.S. overtook the UK and other European nations as the main economic power, Americans have grown accustomed to being number one. As time went by, this status became for them a natural feature of the world. I happened to live in the U.S. when China became the number one economy on a PPP basis. Americans were in a state of shock. The sudden realization that they had lost the pole position led to unconstructive reactions. For instance, an attempt was routinely made to sweep PPP comparisons under the rug. More seriously, the loss of the pole position helped feed the bipartisan and widespread fear that China constituted a major threat to the U.S. in economic, political, and military terms.

The prevailing attitude to China's economic rise is understandable, but irrational to some extent. Facts are facts. We may struggle against unpleasant ones and wish away inconvenient realities, but in the end, this is useless and normally counterproductive. Reality will prevail over subjective preferences.

A state of denial is harmful in more than one way. It impedes those who are delusional to react objectively and constructively to realities they dislike. And, worse, it leads them to attempt to harm competitors by means of boycotts, sanctions, and persecution. Now, what does this achieve? The rising nation is bound to take retaliatory measures itself. And even if it does not do so, the degree of economic interconnectedness creates a situation where sanctions against a large economy inevitably boomerang on the sanctioning power. Growth in the rising power will likely slow down but so will the growth of the economy that initiates sanctions.

The U.S. establishment no doubt realizes this. Nevertheless, it presses on with the hostile approach against China and, for that matter, against any nation that it perceives as an actual or potential threat to its economic and strategic hegemony. Geopolitical considerations prevail over economic calculations.

For centuries, the West has become used, "addicted" is perhaps a better word, to dictate terms to all other countries. Most of the world was drawn into its sphere of dominance, becoming colonies or semi-colonies. The West ruled the rest. In China, Europeans and Americans imposed "the century of humiliation" that lasted from the mid-19th century to the mid-20th century. This epoch in world history is now gone. A multipolar world is emerging whether the West likes it or not.

Ideally, Americans and Europeans would come to terms with this new world and revise their behavior, becoming more respectful of other nations and less prone to interfere with the way they run their affairs. To judge from recent events, however, this positive expectation seems far from assured, to say the least. On the whole, an attitude of militant resistance to international trends seems to prevail in the West. It's a harbinger of difficult times for all.

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