China’s Economic Rise -Fact and Fiction

China’s economy will surpass that of the United States by 2035 and be twice its size by mid-century, a new report by Albert Keidel concludes. China’s rapid growth is driven by domestic demand—not exports—and will sustain high single-digit growth rates well into this century.

In China’s Economic Rise - Fact and Fiction, Keidel examines China’s likely economic trajectory and its implications for global commercial, institutional, and military leadership.

Key Conclusions:

• Potential stumbling blocks to sustained Chinese growth - export concerns, domestic economic instability, inequality and poverty, pollution, social unrest, or even corruption and slow political reform - are unlikely to undermine China’s long-term success.

• China’s financial system, rather than a shortcoming that compromises growth potential, is one of the strengths of what the report calls “China’s money-making machine,” in part because of its ability to support the financing of infrastructure and other public investments necessary for sustained rapid growth.

• A Chinese economy that eclipses the U.S. by mid-century has both commercial and potential military implications. China will be the preeminent world commercial influence. China’s military capabilities are a small fraction of the United States’ today, so there is time to prepare for a very different world in fifty years.

• American policy makers should take this opportunity to enact wide-ranging domestic reforms and rethink their concepts of global order.

“China’s economic performance clearly is no flash in the pan. Its growth this decade has averaged more than 10 percent a year and is still going strong in the first half of 2008. Because its success in recent decades has not been export-led but driven by domestic demand, its rapid growth can continue well into the twenty-first century, unfettered by world market limitation.

China’s likely continued success will eventually bring an end to America’s global economic preeminence, requiring strategic reassessment by all major economies - especially the United States, the European Union, Japan, and even China itself.”