China, now the most powerful economy in the world

Our belief, over the past decade, that China would overtake America as the most powerful nation on earth has, as the reader might imagine, been met by sceptics with the age-old defiance of hegemons, that they can never fail or fall. History tells us otherwise with countless cases of decline in power from the mighty peaks of domination to oblivion and a chapter or merely a footnote in history. In this process of denial, even when a challenger is identified, the collective human response has always been to push the timing of a power crossover into the distance, in the forlorn hope that the status quo will not change for the foreseeable future.
The reality is the very opposite, because of the speed of the Expansion of Empire phase as described in BTCH is exponential rather than linear, it always catches the leader-state of the age by surprise. China's rise is no different. Whilst conservatives still see the tipping-point based on dollar value GDP as eight to ten years away, the reality is very different as shown by a recent study from the World Bank. This study concludes that China is already the world's largest economy, as purchasing and wage costs are so much cheaper than those in America, giving the government greater effective spending power and productivity than that of the US. This matches the evidence of Chinese economic power across the world that is now so obvious to even the most die-hard head in the sand believer in American supreme power.
When this GDP effect is combined with the stark difference in national debt it becomes startlingly clear that China is now the most powerful economy in the world. The next stage will be its militarisation to that commensurate with a super power.
Interestingly, China attempted to prevent the publication of the report. Some believe that it was because they do not wish to have excessive foreign aid demands placed upon them. The more realistic reason is that there is an element in the current regime which wishes to play down China's expansion to prevent America from waking up to the threat and its state of inferiority. This may yet provide time for the Americans to change their policies, increase growth and so more effectively combat the shift in the balance of power.




There is much news out there today pertaining to China's debt bubble and the likely explosion to come. You do not mention any of this in your macro write ups based on BTCH about China. Do you have any opinion on how this will likely impact the future?

A very good point! There is a fundamental difference with the US debt which is held by a significant number of foreign investors and which has built up because the US was an empire in decline that could not balance its books. On the other hand, China's debt is held domestically and has been used to finance a hugh phase of economic expansion. US profile is very much one of a power in the declining phase with no hope of growing its way out of the mess, whilst China can grow its way out of any shock, and its pattern is consistent with a nation in the early phase of ascension to empire, with tremendous resilience.