In 1950, a year after Mao had won, American politicians debated, “Who lost China?” In 2025, the agonizing question in America will be, “Who lost to China?” While the post-American era is imminent, no mainstream politician or media now wants to plan for it or even acknowledge it. Rather than diplomatically cementing a role for itself in a new multipolar world order, the U.S.A. is lashing out against China through trade war, tech war, proxy war, and bravado about hot war and decoupling. By fueling the delusion of long-lasting American primacy, U.S. elites are ensuring cataclysmic political upheaval.
Looking at the big picture, America’s economic influence peaked seventy years ago. Since 1950, the U.S.’ share of global GDP has fallen from 50% to 24%, and this number will continue to shrink over the next decade.
From another perspective, the U.S. accounts for only 4.2% of the world’s population, and thus can’t dominate the other 96% forever. However, the American triumphalism after WW2 and the collapse of the Soviet Union has led to the fantastical belief that the U.S.A. would continue to reign as the sole superpower. After all, the U.S. has the global reserve currency, cutting-edge technology, mighty military, dominant media, and the soft power. Who can successfully challenge that? Answer: China.
Imminent Seismic Events
Here are some consequential geopolitical changes coming within the next five years:
- By 2023: China surpasses the U.S. in nominal GDP
- By 2024: Chinese Yuan becomes a major global reserve currency (after USD and EUR)
- By 2025: China catches up with the U.S. in semiconductor technology
The mainstream media and pundits constantly play down China’s achievements, because they think that perception is reality. However, China has already surpassed the U.S. in numerous areas – international patents, scientific publications, number of Global Fortune 500 firms, e-commerce, most valuable hi-tech startups, GDP and R&D spending – both measured by purchasing power parity (PPP), size of middle class, representation in the Top 10% of the world’s wealthiest individuals, manufacturing, exports, trade, and so on.
America’s technology leadership, the key pillar of global primacy, has become wobbly. There is no American equivalent to Huawei, the global telecom and 5G leader. For three years in a row, Huawei has been the #1 company in patents in the world. It also briefly surpassed Samsung in 2020 as the #1 smartphone vendor in the world. Rather than wasting money on stock buybacks like U.S. corporations, Huawei spends $20 billion a year on R&D. In other critical areas such as AI, blockchain, robotics, drones, autonomous vehicles etc., China has become extremely agile at democratizing technologies and turning concepts into products.
Who has Fake GDP?
For more than 120 years, America has been the biggest economy in the world, and that’s about to change. China can catch up with the U.S. in just three years with one trick up the sleeve: let Yuan (RMB) appreciate by 4-5% every year. As China shifts its economic model towards consumption, the rise of Yuan will be natural and necessary.
Moreover, did you know that 15% of U.S. GDP number is fake and is based on “imputations” or what-if scenarios? For example, when a person buys a home, the U.S. government adds “imputed rent” to the GDP, which is based on the faulty logic of, “If the person had not bought a house, he would have spent this much on rent.” It’s actually spelled out in the U.S. government’s website. If you subtract this fictitious, non-existent spending from the official numbers, the U.S. GDP this year will be only $17 trillion, which is practically the same as China’s expected GDP of $15.5 trillion.
What’s more significant than China catching up with the U.S. is the future growth for China. With a GDP-per-capita of only about $12,000 now, China has another twenty years of robust growth.
As for the U.S., even before the pandemic, 44% of American workers were stuck in low-wage jobs. In the last fifty years, the corporate overlords have managed to keep the inflation-adjusted median wage of American workers flat. With half the country broke and left behind, the U.S. economy doesn’t have a growth narrative. The only illusion of growth is in the U.S. stock market, which is engineered by bailouts and stock buybacks.
Trump is eagerly embracing gangster capitalism, perhaps due to his experience in construction and casino businesses. While he started by harping on trade deficit, he moved the goalpost and kept adding new demands — “China should open up more” … “China should not demand joint ventures” … “China should have more stringent protections for IP” and so on. Beijing quickly gave in to all of those demands, but drew the line on the sand when it came to dismantling its state-owned enterprises or its socialist system.
(On a personal note, I went to China last year and was blown away by the success of their economic model. Magnetically levitated bullet trains, world-class subways that are also inexpensive, shimmering skyscrapers, hotels with stunning architecture and excellent service, ubiquitous electric buses and cars, safe and well-organized cities, a vibrant middle class, malls full of western brand stores, smartphones to pay for everything, people dancing in public squares … this was not a gloomy communist country. I didn’t see any homeless people or slums either. The Chinese socialist system also provides virtually free college and universal health coverage. It’s no wonder that a long-term Harvard study shows that China’s central government has an approval rate of more than 95%.)
When Trump’s imperialist demands failed, he quickly resorted to gangster playbook by arresting Meng Wanzhou, the CFO of Huawei. When kidnapping and blackmail didn’t work out, Trump switched to economic warfare and placed sanctions on Huawei and dozens of other successful Chinese hi-tech companies (like DJI, Hikvision, and SenseTime). Of course, pointing a gun at TikTok’s head and trying to force a liquidation sale is also right out of the Mafia movies.
China has Won
It might be surprising to some observers that Xi Jinping is not retaliating. After all, every major American company has a huge presence in China and thus could easily be punished. However, China is actually opening up even more. Tesla is loving its new factory in Shanghai; and financial giants like JP Morgan, Vanguard, BlackRock, and American Express just started new ventures in China.
What’s the Chinese strategy?
Xi Jinping is architecting the roadmap for 2050, while Don Quixote Trump is obsessed with 1950. Consider the abysmal failure of Trump’s trade war that brought down the trade deficit with China by mere 1% in three years (2016-2019). Furthermore, a survey from a few days ago revealed that 92% of U.S. corporations in China have no plans to leave China; and only 4% plan to move some production back to the U.S.
When Trump imposed tariffs and reduced imports, China nimbly adapted, making ASEAN and E.U. its top two trading partners. The Chinese economy is also rapidly modernizing itself by moving up the manufacturing value chain and emphasizing the services sector. China’s priorities now are hi-tech startups, smart factories with industrial robots, and financial firms … not shoe factories of the 1990s.
In Chinese, the word for “crisis” is said to be a combination of “danger” and “opportunity.” Thus, every U.S. sanction is being turned into a massive initiative to develop domestic industries. At the same time, China is not worried about the U.S. going too far, since there’s mutually assured destruction in the spheres of economics and military warfare.
Finally, China is working on digital currency (DCEP) and blockchain-based international trade, both of which will make the U.S. dollar less relevant. Already, companies in Australia and Brazil are selling iron ore in Yuan. How long will it be before countries start selling oil in Yuan – i.e. Petroyuan challenges Petrodollar?
As billionaire and hedge fund manager Ray Dalio points out in his video, empires come and go. The Spanish, Portuguese, Dutch, British, French and others all understand the painful cycles of history.
America needs to negotiate the multipolar world order with China now — not few years later, when China will be convincingly stronger than the U.S. A geopolitically strategic proposition would be for China and the U.S. to share power and lead – not rule – the world as a team. “Chimerica” can be a force of good that promotes cooperation, trade and connectivity, while addressing monumental challenges such as pandemics and climate change. Peace with China will allow the U.S. to slowly unwind many of its 800 military bases around the world. Eventually, the U.S. needs similar rapprochement with other rivals such as Russia, Iran, and North Korea. Then America can turn to the fundamentals at home – building infrastructure, expanding the middle class, reducing inequality, improving education, healing racial divisions, fixing healthcare etc. The end of American imperialism will lead to American rejuvenation and a peaceful, prosperous chapter in history.