There is a dirty little secret in economics today: the United States has benefited – and continues to benefit – from the global slump. The US economy is humming along, even while protesters in the United Kingdom hurl milkshakes at Brexiteers, French President Emmanuel Macron confronts nihilist yellow-vested marchers, and Chinese tech firms such as Huawei fear being frozen out of foreign markets.
Given the failures to foresee the 2008 financial crisis and subsequent weak recovery, it is easy to think that economists have little to offer in the way of predictions. But when it comes to national-level GDP growth, past projections have largely been borne out; even when wrong, they can be used to diagnose structural problems.
The accuracy of China’s official growth statistics is once again in question. Last week, at the annual “two sessions” conference, Premier Li Keqiang announced that China would reduce its 2019 target for GDP growth to between 6 and 6.5 percent—previously, it was “around 6.5 percent.” That same week, a group of Chinese economists published a paper with the Brookings Institution concluding that China’s official nominal growth rates from 2008 to 2016 were being overstated by as much as 1.7 percent.
There is no question at this point that the relative sizes of the U.S. and Chinese economy today are much closer than those of Japan and the U.S. in the interwar period. And long story short, underselling the size of the Chinese defense budget and overselling the size of the Chinese economy does tend to obscure the magnitude of China’s defense buildup.
As China battles a trade war and international suspicion, delegates at this year’s National People’s Congress can no longer concern themselves only with domestic issues, analysts say And as the 70th anniversary of Communist Party rule draws ever nearer, the last thing Beijing needs is more disruption.
India isn’t keeping the best company. When Reserve Bank of India officials reviewed the global economy at February’s meeting, they ticked off a list of major emerging markets that had struggled: China, Russia, Brazil and South Africa all got a must-do-better grade. Disappointing numbers released Thursday mean policy makers can add one closer to home: India itself.
When scholars of international relations predict that the 2000s will be a “Chinese century”, they are not being premature. Although America remains the lone superpower, China has already replaced it as the driver of global change.
Trump haters may be tempted to conclude from all this that he is about to lead America into a sudden decline, but that is not the point. This American decade started under President Obama, continued under Mr. Trump and survived congressional gridlock throughout, showing that the economy often rises above politics. The economy is driven less by ideology than by its own internal cycles, and this cycle has been turning in America’s favor for so long that it is unlikely to last much longer.
The biggest national security issues, however, arise from the unpredictable political impact of a recession in China. We learned this, or should have, during the 1997 to 1998 Asian crisis. China may have had a disguised recession or near recession in 1998, but it was in a much smaller economy. Apart from that one episode there is no collective memory of recession and how to deal with it. As such, China is now psychologically unprepared to deal with the challenges of a recession.
China’s economy grew at a slower quarterly pace than expected, expanding 6.5 per cent in the three months ended September, as the country’s trade war with the US exacted a toll on exporters and manufacturers. The quarterly growth pace lagged the 6.6 per cent expected in a Bloomberg poll of economists, and was slower than the 6.7 per cent clip in the second quarter, according to data released by the National Bureau of Statistics in Beijing.
