Is China underrated or overrated?
There are two conflicting views on the rise of China.
View.1: China is underrated
In terms of the real economy that you don’t count the virtual wealth boosted by finance and insurance, China has already surpassed the US back in 2008. Now its industrial output is larger than the rest of the top 6 countries combined.
The US still has technology advantages but it will not last long. Technology is useless if it cannot be mass-produced and innovation breakthroughs could start from the laboratories but can be truly achieved only at the factories. Thanks to its manufacturing capabilities, China is already outpacing the US in many future-defining areas such as 5G, infrastructure, robotics, transportation, energy generation, and storage. Soon, it will catch up and perhaps even surpass the US in AI and semiconductors.
The US is trying to cut off China from the global value chain but it won’t be easy as it sounds. China has been cultivating the entire industrial chain system for decades, providing the most complete raw materials and technical support, which cannot be replaced by any country in a short period of time. The process will be extremely expensive, time-consuming, politically complex, and unpredictable. Also, it is questionable if the US and also the entire West are politically united enough to give up China as a consumer market.
View.2: China is overrated
China has hit its peak and now it is sliding downhill. Their remarkable infrastructure and massive manufacturing output are the consequences of oversupply that have created serious bubbles. Soon or later, all bubbles collapse. China’s local government debt is in default and the real estate market is in crisis. Nobody, not even China, can maintain oversupplying forever.
It's already having a hard time today, but its tomorrow will be even worse. It is one of the fastest aging countries, posed to face catastrophic demographic issues that could potentially cripple its entire system. Foreign investment and manufacturing companies, which have contributed a significant portion of the Chinese economy, are starting to leave the country due to geopolitical tensions and China’s self-defeating nationalism.
The US needs an enemy, so it chose China. The growth of China is overrated, the US knows it but they are intentionally boosting the fear to turn Beijing into a boogeyman.
Is China overrated or underrated? Honesty, I don’t know. This controversy has been around over the past 20 years but it seems we need more time to find out the answer. I wouldn’t be surprised if it would take another 10 years for a solid answer.
But I think there’s another key question that deserves our attention. Shouldn’t we navigate to find a positive-sum approach so that China’s economic rise can actually enrich the free world countries? Would our lives be better off if China fails? Perhaps, our view of China is too competition-based.
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