Can China buy the century, too?
Plenty of geopolitical prognosticators are using Chinese President Hu Jintao’s visit to the United States as another opportunity to dub the 21st century as belonging to China.
In the last 50 years, China has undergone a remarkable economic transition from a poor command economy ravaged by famine to a world economic powerhouse surging to 10% economic growth year after year.
In the last 3 years, economic growth in the United States has been decimated by burst bubbles leading to layoffs, recession and 10 percent unemployment rates.
Yet we think it’s highly premature to predict the demise of American economic strength and crown the Chinese as the economic dynamo of the century. If anything, the next 100 years will be the century of economic interdependence.
The symbolism of President Barack Obama hosting the Chinese for a formal state dinner at the White House shows the importance of the economic ties between the two countries. Despite China’s status as an authoritarian regime that prohibits and punishes political rival to the Communist Party, we are willing to treat them to the pomp and ceremony of a state dinner out of respect for their economic success and potential.
It turns out that we need the Chinese just as much as they need us.
The annual GDP of China is now at around $10 trillion while the American GDP stands at about $14.5 trillion. When divided out per capita, China’s GDP is about $7,500 per person while the U.S. produces about $47,500 per person. China has a little ways to go to surpass our overall productivity, and miles to go in matching our relative wealth.
The Chinese economic success as a market economy was made possible by investment dollars pouring in from the United States and around the globe to take advantage of relatively cheap labor that helped lower the cost of everything from t-shirts to computers. But this influx of cash into China didn’t just sit there.
China has sent about a trillion dollars back to the United States to help us finance our governmental debt. It has also used its massive governmental surplus to continue modernizing their economic infrastructure. This development has directly benefited Illinois firms like Boeing, Caterpillar and John Deere who have exported billions of dollars in equipment to China in the last two decades.
President Hu Jintao visits Chicago today as a sign of respect for Mayor Ricahrd M. Daley’s vision about this economic interdependence. Daley saw the important role that China would play in the Chicago economy more than a decade ago. And his personal commitment to building business and cultural ties with China will be honored during Hu’s visit.