MNI INTERVIEW: China-US Frictions To Persist Until Mid-Century

Economic tensions between Washington and Beijing are likely to persist until around mid-century, when China’s per-capita GDP reaches roughly half that of the United States, a prominent Chinese policy advisor told MNI on the sidelines of the National People’s Congress, ahead of the expected heads of state meeting at the end of this month.

Despite a recent moderation in anti-China rhetoric from President Donald Trump, the U.S. will only acknowledge China as an equal economic power once GDP per head reaches roughly half that of the United States, said Justin Lin Yifu, a member of the Standing Committee of the Chinese People’s Political Consultative Conference National Committee.

At that stage, he said, the gap in productivity, industrial capability and technology between the two economies would narrow considerably, reducing the effectiveness of efforts to slow China’s development through technology restrictions.

Lin estimated China would need to grow roughly two to three percentage points faster than the United States over the coming decades, implying annual growth of around the mid-4% range. (See MNI: China's Decades-Low GDP Target Fits Econ Slowdown Trend)

If China sustains that pace, its per-capita GDP would reach the halfway point by 2049, he said, adding that this would help stabilise bilateral relations and contribute to greater global stability.

Lin, whose work examines historical shifts in economic power between nations over time, said that because per-capita GDP reflects average labour productivity as well as levels of industrial and technological development, the United States would no longer enjoy a clear advantage, limiting its ability to constrain China’s progress. China’s more advanced regions, with a total population around that of the U.S., will see per capita GDP on par with America’s, he said.

Washington will also have stronger economic incentives to cooperate rather than confront, Lin argued, noting that U.S. high-tech firms in particular depend on large research and development budgets funded by profits and access to large markets.

By that point China’s domestic market could double that of the United States, meaning many global technology companies — including those in America — would depend heavily on access to Chinese consumers.

At the same time, U.S. consumers would continue to rely on affordable, high-quality goods produced in China. Faced with these structural realities, Washington would need China’s cooperation to sustain growth, protect jobs and maintain social stability, increasing the likelihood that it will eventually seek to repair relations, he said.

TRUMP VISIT

With Trump expected to visit Beijing later this month for a state visit, Lin said the trip offered an opportunity for the U.S. leader to deepen his understanding of China’s natural right to development as a nation of 1.4 billion people.

The visit should also be used to highlight the benefit of comparative advantage between the two economies and their deep interdependence, he said.

“Trade wars and economic decoupling would harm both countries and the global economy,” Lin added.

However, he warned that China needed to take precautions against the potential fallout from a burst in the U.S. AI investment cycle, which he said could be a bubble comparable to the 2008 financial crisis.

Policymakers should mitigate potential external shocks by strengthening domestic circulation and enhancing the resilience of the domestic economy, while also making use of capital account management where necessary, he said.