China’s status in the global economy is stable, for now

Chinese academic Chu Zhaogen notes that while China is well poised to make its mark on the global economy, it needs to keep its eyes open and wits about it, so that it can seize on opportunities, not least in the field of technological innovation.
People line up outside a restaurant at Qianmen pedestrian street in Beijing, China, on 26 January 2024. (Florence Lo/Reuters)
People line up outside a restaurant at Qianmen pedestrian street in Beijing, China, on 26 January 2024. (Florence Lo/Reuters)

The world economic rankings show that the US and China have maintained their leading positions in the top tier in 2023, with the US remaining the world’s largest economy and China in second place. 

Meanwhile, countries such as Germany, Japan and India are striving to catch up in the second tier, with Germany surpassing Japan to rank third globally, and India continuing in its ascendancy. Despite China’s significant development in recent years in terms of economic size, manufacturing, export trade and foreign exchange reserves, among other specific areas of overall and relative advantage, it still faces persistent challenges and must remain cautious and not complacent.

Behind the US

The rapid growth of the Chinese economy has been a significant feature in recent decades. China’s GDP in 2023 reached US$17.52 trillion, maintaining its position as the world’s second largest economy. Additionally, as the world’s largest manufacturing base and exporter, China’s manufactured products enjoy significant competitive advantages in the global market, with its export volume ranking first globally.

China is the world’s largest trading nation with the largest foreign exchange reserves of US$3.1 trillion as of December 2022, which provides important support for China’s position in international trade and economic stability. China is also one of the most successful countries in poverty reduction, now having the world’s largest middle-class population.

In the fields of innovation and technology, China and the US are engaged in fierce competition in emerging technologies such as artificial intelligence (AI) and quantum computing. China’s internet, AI, e-commerce and other sectors are thriving, demonstrating strong innovation capabilities and significant achievements.

... even if China becomes the world’s largest economy, it does not mean that China has achieved great power status.

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US President Joe Biden (centre) looks at a semiconductor wafer during a tour at Intel Ocotillo Campus in Chandler, Arizona, on 20 March 2024. The White House unveiled almost US$20 billion in new grants and loans to support Intel's US chip-making facilities, marking the Biden administration's largest funding announcement yet as it tackles China's dominance of the crucial technology. (Brendan Smialowski/AFP)

In terms of economic strength and potential, China’s economy is nearly five times the size of countries such as Germany, Japan and India, and has significant advantages. Hence, there is a considerable way to go for second-tier countries to surpass China. Similarly, the gap between China and the US has widened from US$7.5 trillion in 2022 to US$9.4 trillion, showing that it will take longer than previously predicted by many studies and forecasts for China to become the world’s largest economy.

In the era of new media, self-media (individuals producing and distributing their own content) like to express various different opinions on international issues. As a result, many people mistakenly believe that China can be as strong as the US, and even anticipate an imminent arrival of a “Chinese century”. 

... despite the significant rise in China’s international status, there has been no structural change. Therefore, strategically, it fights when it is time to fight, and keeps its head down when it is time to do so.

In view of this, there is a need to stress that even if China becomes the world’s largest economy, it does not mean that China has achieved great power status. From a disciplinary or professional perspective, the rise of a great power not only means that the rising power replaces the former hegemon and achieves global leadership, but also implies the ability to lead in international affairs and global hegemony.

The rise of a great power is a multidimensional and multi-level process, including not only economic strength, military power, control of energy resources and other aspects of hard power, but also influence in politics and cultural values, as well as technological innovation capabilities, dominance in international institutions and domestic governance capabilities, among other aspects of soft power.

From this perspective, the gap between China and the US is large indeed. Moreover, although the US overtook Britain’s economy by the early 1890s, becoming the world’s largest economy, it took another 100 years, marked by winning the First and Second World Wars and the Cold War, for the US to establish its global hegemonic status. In this sense, it is crucial to take a rational and pragmatic view of China’s position in the world.

China’s foreign policy and diplomatic strategy

In line with this, it is evident what kind of foreign policy China adopts. The notion that “China has become an elephant and can no longer hide behind the trees, maintaining a low profile and biding its time” is prevalent domestically but not very tenable. China has always been an “elephant” in many aspects such as population and territory.

This is precisely why the US would not dare to initiate a direct attack or full-scale war against China. This is also why the Biden administration repeatedly emphasises the need for intense competition between China and the US, while establishing “guardrails” to prevent escalation of conflicts between the two sides.

... if China fails to clearly recognise its own strengths and excessively depletes them, it will be unable to fundamentally address the numerous long-term challenges facing the Chinese economy.

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The flags of the United States and China fly from a lamppost in the Chinatown neighborhood of Boston, Massachusetts, US, on 1 November 2021. (Brian Snyder/Reuters)

A few experts sensationalise that “war between China and the US is inevitable”, which is an anachronistic interpretation of history, forgetting the era they are in. True experts on China must go beyond overly confident or extremely pessimistic interpretations and understandings.

Besides, China has never officially announced a foreign policy of keeping a low profile. It has consistently pursued an independent and peaceful foreign policy, determining its stance and policies based on the merits of each issue. Keeping a low profile is at most a diplomatic strategy for China.

Overall, despite the significant rise in China’s international status, there has been no structural change. Therefore, strategically, it fights when it is time to fight, and keeps its head down when it is time to do so. How can it afford to lose such a valuable legacy of wisdom that has led it from one victory to the next?

Long-term economic challenges

More importantly, if China fails to clearly recognise its own strengths and excessively depletes them, it will be unable to fundamentally address the numerous long-term challenges facing the Chinese economy.

First, structural economic issues. China’s economic growth model remains driven by investments and exports, while domestic demand expansion and economic structural transformation still need to be strengthened. Meanwhile, China faces structural issues such as environmental pollution, resource constraints, economic inequality and regional disparities, which may pose significant challenges to China’s long-term growth and sustainable development.

Second, changes in the external environment, such as China-US trade frictions and geopolitical tensions, which have an impact on China’s economic situation. In particular, trade frictions between China and the US have led to a partial decoupling of the two economies, with the US increasingly turning to other countries for imports, bringing some uncertainty to China’s export-driven economy, which may have long-term negative effects. Furthermore, China must act cautiously amid complex international relations, trade agreements and geopolitical tensions, while maintaining the trajectory of economic growth.

While China has made some achievements in technological innovation, there is still a gap between it and developed countries such as the US. With a new round of technological revolution in the US, the gap in GDP between China and the US may widen.

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Employees work at a wind turbine manufacturing factory in Qingzhou, in eastern China's Shandong province, on 18 March 2024. (AFP)

Third, challenges in technological innovation. While China has made some achievements in technological innovation, there is still a gap between it and developed countries such as the US. With a new round of technological revolution in the US, the gap in GDP between China and the US may widen.

Moreover, the US may still maintain its world-leading position in technological innovation in the long term. Therefore, China needs to further strengthen its independent innovation capabilities, improve the level of independent control of core technologies, and ensure a favourable environment for creativity and technological breakthroughs, which are crucial for its future development and competitiveness. Despite being an innovation powerhouse, China still faces the challenge of transitioning from imitation-driven to innovation-driven growth.

Furthermore, China needs to reflect and be aware. Friedrich Engels once said, “If society has a technical need, that helps science forward more than ten universities.” With a population of 1.4 billion people, the world’s largest consumer market, and its massive market playing a “dual-core role” of the “world’s factory” and “world’s market”, China should have no shortage of demand for technological innovation.

Even the director of the CIA expressed concerns over a decade ago that after more than 30 years of rapid development, revolutionary new technologies and significant disruptive innovations may emerge in China, posing a significant challenge to the US. 

Therefore, I also feel that there is good reason for this to happen in China. However: Why not? While China has no immediate concerns, it cannot lack foresight. It must focus on the future and formulate appropriate strategies to cope with challenges to maintain its position and influence in the global economy.

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