China overtakes US economically

China overtakes US economically

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Shatha Khalil *

China is an important driving force for the stability and recovery of the global economy where the rate of China’s contribution to economic growth has reached about 30%, as a study conducted by (HSBC) confirmed that China will outperform the United States and become the world’s largest economy by 2030, with a GDP of $ 26 trillion, up from $ 14.1 trillion currently.
Ad hoc studies on economic forecasts for the next 12 years included 75 countries around the world, suggests that within 10 years, China and India will dominate the West and influence their decisions as the emerging world economies become larger than those of the developed world.
China will continue to be the largest contributor to global growth over the next 10 years, with the country expected to contribute 70 percent of global expansion by 2030, HSBC said in the study.
The study also predicts that India will overtake Japan and Germany to win the title of the world’s third-largest economy, while Australia and Norway will exit from the top 30 countries as a result of its small population and aging. Bangladesh will rise 16 places to rank 26th.
The statement , issued by the state statistics Bureau of on Feb. 28, confirmed that the China’s gross domestic product (GDP) reached 82.7 trillion Yuan in 2017 , an increase of 6.9 percent from the previous year (equivalent to more than 12 trillion), accounting for about 15 percent of the country’s GDP, of the global economy, ranking second in the world.
According to the data, China’s total imports and exports of goods reached 27.8 trillion Yuan in 2017, as it is expected to regain its first place globally, and foreign exchange reserves reached 3139.9 billion dollars, ranking first in the world.
The employment rate continued to rise and the unemployment rate fell to 3.9%, the lowest level in recent years. Cereal output has stabilized to more than 600 million tons for five consecutive years. The income and consumption of the population has increased continuously, as the per capita share of disposable income rose by 9% over the previous year, and consumer spending per capita increased by 7.1% from the previous year. On the other hand, China witnessed the renovation and construction of 6796 km of highways, the construction of 2,182 km of high-speed railway lines, the increase of 705 km optical fiber cables, as well as the construction of the largest highways, railways and communications networks in the world.

More than 100 trains are on standby at the Wuhan train station, and strawberry fruits grown on a typical farm in Jingxi Guangxi city , on an area of more than 500 mu (15 hectares) enter the market.
The investment and employment index in the market of US real estate provides that the Chinese recorded between 2010-2015, the first place in this index about 110 billion dollars, and then come Canadians and Indians, and the Americans view this Chinese rush with a kind of apathy and sorrow, for example, Presidential candidate Donald Trump has consistently accused the Chinese of “sucking the blood” of the US economy.

All this prompts one to think about the reality of the geopolitical transformations of our modern world that is, how it actually looks like who is who.

In a report by the Rosen Consulting Group of Real Estate in association with the Asian Study Association in the United States see, the Chinese buyer usually preferred to buy in the United States, the average house separated from other homes worth more than 830 thousand dollars.
During the above period, Chinese investors bought hotels and offices worth of $ 17 billion , while the remaining amount went to buy residential properties, especially in California.

The Washington Post came to accuse the Chinese of depriving the US state of Maine of thousands of jobs and in addition they devour the largest part of the country’s famous crayfish (freshwater lobsters).
Of course, when the Chinese buy real estate and goods in the United States, it brings the economic benefit for the country, so it is good, but when the subject of buying and selling is a property or a company of historical value, here the subject of emotions of a non-economic nature enters and overwhelmed by national pride.
The question here is what is strongest in this case, the emotions or the material benefit and how America will act later as a political system and as a civilization.
Overall, the report provides interesting figures, including, for example, that China’s investment in real estate provides 200,000 jobs for Americans, especially in commercial real estate, and Trump certainly knows it well because it is his business but he will not talk about it during the campaign.

It is known that the US Treasury is highly indebted to China because the latter actively buys US government bonds. Less well known, however, is that China is the world’s largest and first foreign holder of other US securities, including real estate issued by financial real estate companies such as Fannie Mae and Freddie Mac (Now half-government), and is now owing (in debt) to China for $ 207.9 billion.
It is remarkable that these obligations are guaranteed by real estate, and if none of these companies can pay the obligation to the Chinese party, this will mean the party’s receipt of the encumbered material ie the real estate.
Fannie Mae and Freddie Mac are the usual symbol of the 2008 financial crisis (this company went bankrupt during the crisis and the state bought it). This means that China actually saved the US economy from that crisis and is now saving it from the possibility of recurrence.
In general, we see a growing correlation between the world’s first and second economies, which is at the heart of China’s geopolitical strategy and pushing the US to be cautious.

According to a recent report by Oxfam International organization , a charity foundation founded in 1942 under the name of the Oxford Famine Relief Committee, billionaires in the world head the world’s 62 mega-corporations. They own like what half of the world’s population owns together , they constitute as it is said, “the global shadow government that operates behind the scenes.”

Half of the group (62 people) are in the United States, eight of them are present in China, three in Hong Kong and the rest in Europe and the rest of the world, according to the report.

The most important advantages in the trade of Chinese goods:

The most important of which is that the labor wages are cheap compared with wages in the United States, which gives it the advantage of exporting goods that have higher labor costs and make them stronger to compete with industries within the United States. China also has a large population that exceeds four times the population of the United States, giving its industries economic advantages to reducing the costs of a large number of products.
China’s export- friendly trade policies have contributed to raising China’s export values, and the government’s strong role in industry in promoting exports has contributed to currency control policies in curbing the growth of the Chinese currency, which limits the rise in the prices of Chinese goods exported abroad and makes it more competitive . Other Chinese policies contribute to increasing the competitiveness of Chinese products, such as less stringent environmental restrictions than US environmental restrictions, as well as China’s somewhat lax labor policies. China’s central-funded finance policies also contribute to reducing the costs of funding inside China.

On the other hand, the United States has a large surplus with the outside world in the services sector, which exports services worth about three quarters of a trillion dollars and imports about half a trillion dollars, and believes that the volume of trade in services is greater, because of lack of information and reporting on trade in services, The United States enjoys a surplus in trade services with China may exceed 40 billion dollars annually.

The United States benefits from exports and the Chinese economy through the returns of its huge corporate investment in China. A company like General Motors that its sales in China outperforms its US sales , and Apple makes most of its mobile phones in China and this is the case for many US companies .

However, much of the trade between the two countries is due to trade among the branches of multinational companies around the world. Some estimate that one-third of global trade is among the parts of multinational companies, which are largely controlled by US investors, thus the US benefits also from the China’s trade surplus with the world.

US foreign trade in goods is suffering from a large deficit for many years with many major and minor countries, which means that the US trade deficit is not limited to China alone, which confirms that there are reasons for the US economy, which focuses on services more than manufacturing, and the decline in US government subsidies to industry means that US products are less competitive than countries that support their industries.

The deficit is due to the ability of the United States to print money without limits and the acceptance of the world in its currency and bonds, which raises the value of the US dollar compared to other currencies and reduces the costs of American debt and facilitates America to import and consume more goods at low prices compared to domestic industries, and the customs of American people contribute , which tend to consume at the expense of savings and enrichment of broad segments of it, to increase demand for the imports.

Why is Donald Trump afraid of China? Trump puts , in his first file the economic file, as he puts in his plan to fight a trade war with China. This war in short as follows: based on surveys conducted by Trump advisers, they called on the president to protect the US economy and prevent its collapse so Trump decided immediately to fight other global economies, “Trade wars are good and easy to win,” he said. He hit the Chinese economy by imposing additional duties on Chinese imports, charging a fee on Chinese goods worth of $ 34 billion.
China in return imposes custom fees of % 25 on 545 US products ,and an official government statement of Beijing said ” China will fight to the end to defend its legitimate interests with all necessary and possible measures,” accusing the United States of launching the biggest trade war in economic history .

In turn, according to international media, there are reasons why Trump is afraid of China’s economy, the most important of which is that Beijing owns 19% of foreign debt to the United States, meaning that China wants from the US about 1.2 trillion dollars in debt in the form of bonds, and if the government of Chinese President Xi Jinping wants the liquidation of those debts , it may destroy the US economy, and China seems to put this plan at the end of its options because it will not only affect America, but the world, and China itself.

” Trump said. “The imposition of fees is mainly aimed at stopping the transfer of US technology and intellectual property rights to China.” .as he stressed that the transfer of these ideas to China is unfair as they are Americans and he also said he would protect jobs in his country instead of making the China’ economy to benefit from it
The next few years will see economic fluctuations that will change the balance of power in the world.

Economic Studies Unit
Rawabet Center for Research and Strategic Studies