A Chinese Banquet Where I Needn’t Eat My Words

Along about 2012, I began telling audiences in Greater China that I thought the GDP growth trajectories of the U.S. and the PRC would cross. These were groups composed mostly of family business principals who were making good coin off China’s rise, and had they not been enjoying a nice meal from the business magazine I was editing, they might have hooted me out of the hotels instead of just being bemused. After all, this came shortly after China had outshone the world during the Great Financial Crisis and America was seen as past its shelf date. But for lots of reasons, especially the declining return on investment that the Chinese economy was experiencing even during apparent boom years (h/t to Michael Pettis, then a professor there), I didn’t think those gains were sustainable. And I also didn’t buy the gloom still then surrounding the U.S. system.  Well, it took a decade but as this story from Reuters and others this week confirms, Chinese growth fell short of the U.S. in 2022.  And that’s by the Communist Party’s own statistics (3%), which are always suspect, while Washington’s number (3.2%) is more believable. Of course, there were the Covid lockdowns in Xi Jinping’s realm, so yes, it was an extraordinary year there. But no more extraordinary, I’d argue, than the conjured growth of many previous years–not just in the official figures but in the state-directed capital rushes plus the housing speculation

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driven by the population’s desperate search for a return on its savings. Many expect a snapback in Chinese GDP in 2023. I think it will exceed what comes out of a recessionary U.S., but with all that weighs on China–Xi’s dictatorial rule, a now-declining population, and a shunning by much of global business–I wouldn’t count on meeting so many puzzled stares after dinners around the Mainland anymore.