Business / Finance

Is China Crumbling Under The Weight of Its Own Contradictions?

While China’s total GDP is impressive in and of itself, other measurements point to a very different situation — one of real depression.

Jan 06, 2022 | By Michel Santi
Shanghai skyline
Image: Edward He/Unsplash

The gap between the US and China remains wide, with China’s GDP still at only 70 per cent of America’s. Evidently, China’s economic progress has been spectacular, and in this light, the US$14 trillion that make up China’s aggregate product is nothing short of a miracle compared to the state it was in just 20 years ago. But how does China’s quality of life compare to that of other countries? While its total GDP is impressive in and of itself, other measurements point to a very different situation, perhaps even one of real depression.

Nominal GDP, measured against the global reserve currency that is the dollar, puts China at 60th in the world rankings behind the Seychelles and Maldives. As for GDP calculated based on PPP (parity of purchasing power), that being what can be bought equivalently between nations for the same amount of money, it has China relegated to 73rd in the global rankings, behind Guinea for example. The USA is respectively 5th in the first rankings (behind Luxembourg, Switzerland, Republic of Ireland and Norway) and 7th in purchasing power parity.

Forbidden City, China
Image: Ling Tang/Unsplash

In truth, America’s performance is quite exceptional, coming in 5th behind only smaller homogenous and socially stable nations, despite it being a massive and very diversified economic power that is characterised by strong social diversity. In comparison, China’s placing at 60th and 73rd put it behind some of the poorest third-world countries, although its aggregate GDP propels it into second place in the world rankings behind America.

This flagrant contradiction that shows China to be an economic superpower and simultaneously an underdeveloped nation is being manifested on a national scale by the richest Chinese citizens who have the same quality of life as the most well-off westerners, while at the same time the overwhelming majority of their compatriots have a worse quality of life than Guineans. The inequalities are of course a global phenomenon, and sickness, existing in every country. But the fact remains that in even the most unequal western country in the world — the USA — the poorest people’s quality of life is incomparably better than that of Guineans.

Tiananmen Square – Beijing
Image: Wu Yi/Unsplash

Xi Jinping is perfectly aware of his country’s history, in particular the Long March undertaken by Mao that united the impoverished, the peasantry, and those living in misery at the time, into an army that overthrew the regime that was accused of creating injustices and inequality. It is through this lens that we must view the current war on the wealthy that is being waged in China, which has as a stated aim to demonstrate that the Communist Party is taking care of the poor. However, the actions of Xi Jinping and his acolytes are likely to harm China’s production machine, and therefore the country’s face-value GDP. China’s leaders therefore now find themselves at a crossroads of sorts.

Faced with poverty in certain territories that is comparable to that of the most impoverished nations in the world, and forced to adopt extraordinary — and often theatrical — measures to show to their citizens that they fully intend to fight this plague, they are well aware that their actions are destabilising confidence in their economy for the business world, and therefore weakening their GDP that they are understandably so proud of.

Michel Santi
Michel Santi, Macroeconomist and Art advisor.

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