Forum for Innovation

In recent years, some news sources and think tanks have labeled China an economic threat to the United States due to its rapidly growing GDP. The Organisation for Economic Co-operation and Development^[1] and the Economist Intelligence Unit^[2] project that China’s GDP will surpass America’s by 2016, and CNN Money refers to China as “an economic threat.”^[3] I will argue quite adamantly that China is not, in fact, an economic threat to the United States. 

I’d like to point out that GDP is not the optimal measure of economic growth. A significant component of China’s GDP consists of government expenditures, which includes subsidies to and bailouts of state-owned enterprises, which—by virtue of being state-owned—never go bankrupt as long as the government does not let them go bankrupt. Funneling money to monopolistic or failing enterprises in order to keep them profitable is a common practice in China, and despite all of that money counting toward China’s GDP, it is likely not indicative of economic growth. In fact, it is more likely indicative of slower growth. Indeed, some suspect that China is releasing deliberately inaccurate economic GDP figures, though the government disputes these claims. 

More optimal indicators of economic growth include median annual household income ($10,220 in China compared to $84,300 in the U.S. as of 2010);^[4] income inequality (China’s Gini coefficient is 41.5 compared to 40 in 2001); or car sales or oil imports (4.4 million bbl/day for China vs. 11.31 million bbl/day for the U.S., both rising at similar rates), since China’s growth is based on industrializing.^[5] There is no denying the fact that China’s economy is growing rapidly, but these figures indicate that China’s growth is not occurring rapidly enough to catch up to the United States in, say, four years. I also should point out the fact that America’s median household income is eight-fold what it is in China, which shows the long road of development ahead for the country. 

At least in the foreseeable future, the United States’ economy will continue to be the largest and most conducive to profitability in the world.