Once China catches up - what then?

Sep 27, 2013

By Lee Kuan Yew

BARRING any major disruption, the speed at which China is growing in terms of total gross domestic product will enable it to catch up with the US by 2020. China will then go on to surpass America.

During the 1978-2011 period, China's high average rate of growth - about 10 per cent annually - was the result of Deng Xiaoping's 1978 trip to Singapore and his subsequent decision to implement economic reforms and open the economy to international investment. During that period, the US economy's annual growth rate was 2 per cent to 3 per cent.
Despite the financial debt crisis in Europe and the turmoil in US markets over the past few years, China's economy has continued to register strong growth. According to the World Bank, China's US$8.22 trillion (S$10.3 trillion) economy is now the second largest in the world, compared with the US$15.68 trillion US economy. China is the world's largest exporter and its second-largest importer. The recent global economic crisis has allowed China to close its economic gap with the world's top developed nations.

In 2012, China's per capita GDP was US$9,233, compared with US$49,965 in the US. In 2020, China's per capita GDP is projected to reach US$10,000, one-fifth that projected for the US. China's population in 2012 was 1.4 billion, America's 316.5 million. In 2020, China's population will remain four times that of the US. China's economic growth rate will continue to increase at a much higher rate because the base upon which its economy will grow is enormous in comparison.

[However, a later article, pointed out that China is ageing very fast. By 2030, there will be 300m Chinese over 65. So by 2020, China's population may still be 4 times that of the US, but an ageing population will lessen that absolute advantage. The later article also suggests that China's population will peak soon, if it has not already peaked. In 2011, it's workforce shrank for the first time.]

Just as the US Interstate Highway System changed the way people and goods move across America, so China's National Trunk Highway System will facilitate economic development. China's highways have grown rapidly in total length, from 271km in 1990 to 85,000km in 2011, making this the world's longest national freeway system. The US Interstate Highway System - started in 1956 and considered complete in 1991 - totals 47,182 miles (75,932km). It is not expected to grow significantly going forward. China, on the other hand, continues to expand its expressways and is intent on connecting all provincial capitals and cities with populations over 200,000 residents. These new highways and the economic growth they will drive will help close the gap with the US. And when China does surpass America, the question then will be whether these two great major powers will cooperate or compete.

[The suggestion is that with the shrinking workforce and ageing population (exacerbated by the one-child policy which means that many of these aged will end up relying on - or trying to rely on - state-run institutional care. Which is best described as "threadbare"), China will grow old before it grows rich, and there are signs that it's economic growth may falter unless it can shift from a labour-intensive approach (which is most suited for a young and expanding labour force) to an innovation-based approach (unlikely as the support and infrastructure for innovation does not seem to be there. However what it lacks in infrastructure it can more than make up with sheer population advantage - if 1% of Americans are innovative, that's about 3m innovators. If just 0.1% of Chinese are innovative, that's still 1.4m innovators.]

I believe that during the next 30 years, the Chinese will have no desire to enter into a conflict with the US. They know they will continue to grow stronger, but they are also aware of how far behind they are technologically. They require continued access to American schools so their students can learn how to reinvent themselves.

What is it that makes Americans so much more versatile and innovative? I believe the Chinese have come to the conclusion that the answer lies in the differing natures of the two societies. Innovation and creativity are a part of the American culture, a natural trait of an immigrant society.

But China's is a culture of conformism. It is a 4,000- to 5,000-year-old society, with a written script that's as readable today as it was 4,000 years ago. That script binds the people to their history.

Yet despite these differences, it is inevitable that the balance of power in the Pacific will shift to the western side.

The writer is Singapore's first prime minister. This article appears in the Oct 7, 2013 issue of Forbes magazine.

[I was convinced that the balance of power will ultimately shift to China over time, maybe beyond my lifetime. But now I am not so certain. We are in a period of "History compression". What used to take generations now occur over 2 or at most 3 generation. That makes any "fortune-telling" or "crystal-ball gazing" speculative at best.]