[Bloomberg Column] The Hegemony of the United States Has Not Wavered

Last Year, GDP Gap Between US and China
Widens Most Since 2010
National Wealth Gap Also Increases for Second Consecutive Year
US Economic Status Continues to Grow

The war between Russia and Ukraine, which has reached a deadlock, the intense and violent Middle East, and the series of international situations such as the power struggle with China seem to indicate that the United States' global status is shaking. However, the fact that the fundamental strength of the U.S. economy, which represents its current power, looks quite strong proves an optimistic view opposing such claims.

In fact, the narrative that "China is developing and the U.S. is declining" has been persistent. Nevertheless, the reality is that the U.S. is ahead of major competitors in economic indicators.

Global power comes from economic strength. Therefore, the prospect that China, which has experienced rapid growth for years, would eventually surpass the U.S. seemed quite plausible. However, now the U.S. economic advantage is growing. In 2023, the U.S. Gross Domestic Product (GDP) was $26.95 trillion, which was the largest gap compared to China's GDP ($17.7 trillion) since 2010 (considering the U.S. GDP figure for Q4 of last year announced on the 25th, it is $27.94 trillion, making the gap even wider).

Of course, GDP has the limitation of only showing a country's production capacity. But the key is that this is not the only factor. In 2022, the U.S. national wealth was $140 trillion, significantly surpassing China’s ($85 trillion). The gap even widened for two consecutive years.

Also, the U.S. significantly outperforms China in other major indicators. Besides GDP and national wealth, these include outstanding credit, research and development (R&D) expenditures, and oil production volume.

In 2022, the U.S. produced 11.9 million barrels of oil per day, but China produced only 4.1 million barrels. Since 2014, the U.S. has maintained a trend of producing at least twice as much oil as China. As global oil production increases, China has become more dependent on imports across its supply lines.

What about debt? In mid-2023, the U.S. total outstanding credit was 253% of GDP. At first glance, this seems alarmingly high. However, during the same period, China’s outstanding credit reached 307.5% of GDP. Until recently, China’s debt size was much smaller than the U.S. Considering China’s smaller economic scale and larger low-income population, debt poses a much greater economic burden on China than on the U.S.

In terms of investment for the future, the U.S. is also ahead of China. The U.S. spends $886 billion on R&D, nearly twice China’s $456 billion. In 2022, the total increase in U.S. R&D spending also outpaced China.

On the other hand, China is winning in the speed of aging. This is truly a poisoned chalice. China’s median age has already surpassed that of the U.S., and as the population declines, the gap between the two countries is expected to slowly narrow.

These statistics are part of the grand narrative that the era of Chinese stagnation has arrived. As Michael Beckley and I wrote in 2022, China suffers from deep-rooted economic problems that it cannot easily escape. One of the worst demographic bottlenecks in history could see China’s population halved by the end of the century, while the state may have to bear greater costs to support its elderly population.

Perhaps a decisive shift toward market reform and liberalization could resolve productivity declines. However, Chinese President Xi Jinping emphasizes political conformity within China and has even stifled economic spontaneity. This is why China will struggle for decades to surpass or keep pace with U.S. economic power. Even if Russia, Iran, and North Korea side with China, adding advanced democracies worldwide to the U.S. side makes the economic balance look even more one-sided.

But it is still too early to pop the champagne. China, the world’s second-largest economy, can focus on trade and investment to attract diplomatic partners, especially in the Global South. And militarily, China remains a country capable of inflicting significant damage on key strategic points. The military balance in the Western Pacific is one of the areas where China is rapidly consolidating its position. As China deploys new ships at sea, strengthens the world’s most powerful conventional missile forces, and expands its nuclear arsenal, it gains better options to disrupt the status quo. Also, as President Xi realizes that China can never economically surpass the U.S., the temptation to use more coercive measures to achieve ambitions like Taiwan unification may grow.

So one risk is that economic decline could make China more violent. Another is that a mistaken perception of China’s decline could lead the U.S. to abandon global responsibilities.

Former President Donald Trump’s claim that the U.S. should break alliances and abandon obligations relates to his view that the U.S. is in complete decline. He argues that U.S. missteps have benefited competitors. Of course, the numbers say otherwise.

The important point is that the U.S. economic position remains strong and is growing stronger compared to competitors. Also, the U.S. still has the capacity to maintain a highly advantageous world order ahead of China. The question is whether the U.S. still possesses the crucial political judgment and geopolitical will.

Hal Brands, Bloomberg Opinion Columnist

This article is a translation by Asia Economy of Bloomberg’s column 'Good Economic News Keeps Putting US Ahead in Cold War II.'