China surpassed the USA

[Anomalocaris]

Considering they have 4.5 times as many people as we do, and their people seem quite industrious and rather clever, I think the shocking thing is not that their economy is now finally bigger than ours, but that ours had somehow managed to remain bigger than theirs for this long.


United States has not fallen. Size of economy is not everything. There is also the sophistication, agility and efficiency of the economy, which the US still remains considerably ahead. It would likely still be several decades before they come close. There is also the trmemdous geographic advantage enjoyed by the US. The United states is not tightly surrounded by other powerful countries deeply interested in our downfall. China is. There is no feasible way for China to match America's trendous geographic advantage.

I hope you are right. Optimistic in my opinion, but I like it.

Right now, China has a big population advantage over the U.S. As a result, with a less developed economy they can surpass us simply by utilizing an enormous rural population which previous did not contribute to the modern industrial economy. This is the reason behind the huge shift - some say the largest migration of humanity in all history - of agrarian rural Chinese into industrial cities. But manpower is not an inexhaustible resource even in China, and most demographers seem to think china will run out of rural labor in the next ten years. Already labor is scarce in China and pressure to increase wages is intense. Once China runs of more labor, any additional productivity growth will have to come purely from improvements in efficiency, and increased return on capital investment.

That would be a game changer. When that happens China could no longer outgrow the U.S. by utilizing a resource China has in abundance but the US does not have - enormous pool of cheat labor. China would have to grow using the same technique developed countries use - improving efficiency, productivity, and return on capital. The U.S. is rather good at this. China does not have a track record of outstanding performance in this area.

So the unique engine that powered the Chinese economy hitherto, which the U.S. can't match, and which enable Chinese economy to power past American economy in size, is rapidly running out of fuel. Soon the Chinese economy will need a different type of engine. This new type of engine is where the U.S. has demonstrated exceptional proficiency, and where China has had an indifferent, one might say mediocre, track record.