When exactly will China take over the world?
The moment of truth seems to be coming closer by the minute. China will become the world’s largest economy by 2050, according to HSBC. No, it’s 2040, say analysts at Deutsche Bank. Try 2030, the World Bank tells us. Goldman Sachs points to 2020 as the year of reckoning, and the IMF declared several weeks ago that China’s economy will push past America’s in 2016. There’s probably someone out there who thinks China became the world’s largest economy five years ago.
The financial crisis made clear that China’s dependence for growth on the purchasing power of consumers in America, Europe and Japan creates a dangerous vulnerability. Those who insist that it’s possible to map the precise arc of China’s rise seem to assume that China’s leaders can steadily shift the country’s growth model toward greater domestic consumption, by transferring enormous reserves of wealth from China’s powerful state-owned companies to hundreds of millions of new consumers.
That’s quite an assumption. Despite the best efforts of policy architects in Beijing, the share of household consumption in China’s economic growth last year actually moved in the other direction, in part because there are political powerbrokers within the elite who have made too much money from the old model to fully embrace a new one.
Moreover, as the gap between rich and poor continues to widen, social unrest will almost certainly force tighter state restrictions on free expression and free assembly. That could promote a violent backlash if rising expectations for material success aren’t met. Most dangerous of all for the ruling party’s future, factions within the government might not agree on how the state should respond to a sudden convulsion of organized unrest.