The Peterson Institute for International Economics has just released a report that many Americans (and doubtless many Chinese as well) will find shocking: Estimates of Chinese GDP by Purchasing Power Parity (PPP) have been revised upward, and China may have already surpassed the United States.While this is news, it may not be particularly meaningful from a geopolitical point of view, or at least not as meaningful as Beijing would wish. China is no stronger than we thought it was, and even though its GDP has grown over the past ten years, sheer size isn’t everything.The most surprising finding, however, can be found toward the end of the piece:
. . . if one believes in the process of convergence or catch-up, which implies that countries slow down as they get richer, future growth projections for China might have to be revised downwards because current standards of living for the average Chinese person are much greater than previously supposed.
Now this is big news. As the Chinese get richer, the economy will begin to slow. Developing economies often grow quickly by picking the abundant low-hanging fruit, and China’s high living standards suggest that there may not be much of that left. From now on, China will have to get used to the more moderate growth experienced by other developed countries.It remains to be seen how Chinese society will adjust to the slowdown.