Last week, the International Monetary Fund (IMF) released figures that demonstrated what many economists have known for years: China now has a larger economy than the United States. China is officially No. 1. Given my childhood in China and my adult life and citizenship in the U.S., I think I, Benjamin Wey, have an insight many others lack. The fact of the matter is that this doesn’t change anything.
The IMF says China’s economy will produce $17.6 trillion this year while America is $200 billion behind at $17.4 trillion. This is measured under the theory of purchasing power parity, which basically takes exchange rate fluctuations out of the equation.
But let’s look a little deeper at the numbers. The standard of living you see around you isn’t based on the absolute size of your economy. If there is a billion-dollar economy with a million people, and if one person has $990 million, everybody else tries to get by on $10 — they are poor. This is per capita GDP, and in China’s case, that figure is about $5,000. America’s is $50,000. My guess is that there are more than two times as many people living in serious poverty in China as there are Americans of all stripes. Estimates are that China will need three to four generations to catch up here.
Political and military power stem from how much of an economic surplus you have. You have to have spare cash to spend on guns, economic aid to other nations and space programs. In fact, China is now increasing military spending, international aid and launching rockets because it can finally afford to. These are all signs that it has arrived, but only recently. Domestic aid is still very necessary.
Moreover, America and China are economically linked, and where one stumbles, the other might trip as well. While some American economic nationalists bemoan the large debt America owes China, the truth is that when a debt gets big enough, the lender is in as much trouble as the debtor. Besides, I, Benjamin Wey, have never run a trade surplus with my grocery store or gas station — but my finances are OK with that fact. Both sides need the other.
In fact, there are economic theories that say as China’s wealth spreads into its interior and those hundreds of millions climb out of poverty, American business can benefit. In my work in finance between the two countries, I see this every day. I also believe that economic integration of China into the global system is going to be good for everyone. France and Germany stopped fighting when they became each others’ biggest customers — international tensions are bad for business.
That raises the question of just what an economy is. When we talk about the American or Chinese economy, we really mean the commercial activity within its borders. But that isn’t really a realistic picture anymore, if it ever was. Globalization has made this less meaningful. We could just as easily say that the Sino-American joint economy is $35 trillion.
We Americans are not really jealous of others’ success. There’s always a little envy from the poor about the rich, but in this country, we tend to celebrate people who are successful. Who doesn’t like the story of the poor kid who grew up to be a millionaire?
And that’s kind of what I think our response to this statistical ranking should be. Benjamin Franklin said, “No nation was ever ruined by trade.” The Chinese are getting richer, isn’t that great? And Americans are profiting from that, isn’t that great?
The last words go to Deng Xiaoping, the head of the Chinese Communist Party in the 1980s, and Andrew Carnegie, the Scottish-American industrialist. Xiaoping said, “To get rich is glorious.” Carnegie said, “No man becomes rich unless he enriches others.”