US Extends Lead Over China

The United States has pulled further ahead of China in the race for the world’s biggest economy, thanks in part to a vibrant American consumer, says an article published on straits times website.

Summary

• The United States has strengthened its position as the world’s largest economy, with a 6.3% rise in nominal GDP in 2023, surpassing China’s 4.6% gain.
• The U.S. economy has emerged stronger from the pandemic, while China faces challenges. The U.S. stock market has reached all-time highs, while Chinese equities have experienced a significant bear-market rout.
• Dr. Eswar Prasad, former leader of the IMF’s China team, notes the short-term and long-term headwinds facing the Chinese economy, including the ongoing real estate bust, deflation streak, declining exports, and excessive debt.
• Josh Lipsky, Director of the Atlantic Council’s GeoEconomics Centre, points out that the pandemic has exposed deep and structural weaknesses in China’s economy. Concerns include the arbitrary exercise of power by President Xi Jinping and the resulting uncertainty.
• Adam Posen, President of the Peterson Institute for International Economics, suggests that China is experiencing “economic long Covid,” marked by prolonged sluggishness and uncertainty.

U.S. Outpaces China

The United States has strengthened its position as the world’s largest economy, with a 6.3% rise in nominal GDP in 2023, surpassing China’s 4.6% gain. The vibrant American consumer has played a significant role in this economic outperformance.

U.S. Emerges Stronger Post-Pandemic

Contrary to expectations, the U.S. economy has emerged stronger from the pandemic, while China faces challenges. The unexpected economic strength is evident in the respective countries’ stock markets, with U.S. shares reaching all-time highs and Chinese equities experiencing a significant bear-market rout.

China’s Headwinds

Dr. Eswar Prasad, former leader of the IMF’s China team, notes the turn of fortunes and emphasizes the short-term and long-term headwinds facing the Chinese economy. The ongoing real estate bust, deflation streak, declining exports, and excessive debt pose challenges for China.

China’s Economic Weaknesses

Josh Lipsky, Director of the Atlantic Council’s GeoEconomics Centre, points out that the pandemic has exposed deep and structural weaknesses in China’s economy. Concerns include the arbitrary exercise of power by President Xi Jinping and the resulting uncertainty, leading to households and small businesses hoarding cash.

China’s Lingering Malady

Adam Posen, President of the Peterson Institute for International Economics, suggests that China is experiencing “economic long Covid,” marked by prolonged sluggishness and uncertainty. The authoritarian exercise of power during the pandemic has contributed to this malady.

Resilient U.S. Economy, Potential Pickup In Productivity

The U.S. has surprised economists with the resiliency of its economy. Some experts, like Adam Posen, speculate that the U.S. may be on the verge of a productivity growth pickup, allowing for faster economic growth without significant inflation.

U.S. Long-Term Challenges

While the U.S. has performed well in 2023, there are still concerns, including the risk of the Federal Reserve keeping policies too tight for too long, potential weaknesses in the job market, and a historically high budget deficit. Long-term challenges may impact the U.S. economy.

China’s Ascent To World’s Largest Economy

Josh Lipsky notes that discussions about China becoming the world’s largest economy have been delayed or even indefinitely postponed. The economic dynamics of 2023 have reshaped expectations about the timeline for China’s ascendancy in the global economic hierarchy.

Did you subscribe to our daily Newsletter?

It’s Free! Click here to Subscribe

Source: strait times

• 
• 
• 
• 
• 
• 
• 
•