The strategy that China wants to overtake the United States in the economy

Last Updated on April 2, 2024 11:08 am

The United States is the world’s largest economy in terms of gross domestic product (GDP). China is the second Asian country in this list. However, China wants to overtake the United States as the world’s top economy and take this place by itself. The country is adopting a new strategy for this.

According to the report of the British magazine “The Economist”, China wants to move forward based on the two mantras of “modernization of the industrial sector and development of new productive forces”. In other words, it wants to overtake the United States to become the world’s top economy in this strategy.

It is reported that Chinese President Xi Jinping visited the northeastern province of Heilongjiang last year. It is an area in China’s rustbelt region, where factories have closed down. This region is an example of the kind of problems that are currently plaguing China’s economy.

Heilongjiang has the lowest birth rate in China. As a result of this, house prices are falling in the big cities of the region. In 2023, the economic growth of this province is only 2.6 percent. But after adjusting for inflation, it can be seen that the region’s GDP growth has not happened at all, but on the contrary, the region is under the grip of deep depreciation. Still nothing to fear. Because Xi Jinping has a plan.

During that visit last year, Xi urged provincial leaders to develop “new productive forces.” The phrase has since been uttered several times in newspapers and at government events. Last month there was a discussion about this in the rubber stamp parliament of the country.

Peking University professor Wang Xiangqing compared the phrase to reform and opening up. He compared the slogan of ‘New Productive Power’ to the principles upon which the New China was launched in 1978. The slogan of reform and market opening still shines in China’s national life. This new slogan is expected to remain for a long time.

Chinese government officials are scrambling to stimulate the economy. For many years China’s productive power was largely dependent on labor and capital accumulation. China’s labor force grew by 100 million between 1996 and 2015; In other words, 10 million more people entered the labor market during this period.

According to research institute Asia Productivity Organization, in the two decades after 2001; That is, in 20 years, China’s capital has increased from 258 percent of GDP to 309 percent. After the global financial crisis of 2007-09, this capital accumulation has mainly been in the new assets and infrastructure sectors.

Analysts say China has mixed Marxist and neoclassical economic theories with the slogan of ‘New Productive Energy’. China is looking to boost production by increasing investment in science and technology—the country is trying to become technologically self-reliant.

At the stage of economic development that China is now in, other countries are generally oriented towards the service sector. That is, reducing the dependence on the manufacturing sector and depending on the service sector. But the heart of the Chinese government seems to be hidden somewhere else. The pandemic has spurred demand for Chinese-made products, from surgical masks to exercise bikes. In addition, since the United States has banned the export of important technology to China, the demand for stainless steel production, suitable for use in airplanes, from lithography machines has increased within the country.

According to the report, as China’s workforce shrinks, so does demand for property in the country. Earlier, as many people used to go from village to city, now not so many people go. The speculative profit that can be made from the housing sector is no longer guaranteed and potential home buyers are not interested in buying flats in advance. Because, they fear, the distressed housing companies will go bankrupt before they finish building.

As the confidence of buyers has decreased after the crisis in the housing sector, the local government’s revenue from the sale of land is also decreasing. China’s economy is not picking up pace despite the lifting of Covid-related restrictions. The recovery is not happening equally in all sectors. On the other hand, government expenditure is not so high that all the working people can be employed. For these reasons, China’s prices have been falling for three consecutive quarters, while other countries are struggling with inflation.

It is reported that the country’s 14th five-year plan has pledged to keep the manufacturing sector accounted for in GDP; In 2006 it was one-third of GDP, in 2020 it is slightly over one-fourth.

China has been trying to bring sophistication to the manufacturing sector for a long time, so they have also tried to formulate appropriate policies. Recently they have taken up new academic programs in semiconductor engineering. The US does not spend much on industrial policy, such as subsidies and tax breaks. China wants to lead the next industrial revolution by fostering new technologies and modernizing old industrial sectors; That is, instead of relying on the service sector, China still wants to move forward relying on the manufacturing sector.

Chinese President Xi Jinping believes that this new productive power will be developed through the application of science and technology in the manufacturing sector. This suggests that China’s ambitions in the technology sector are greater than ever, and that it is becoming better integrated with the economy. China’s leaders have pledged to push the nation to become more self-reliant in the technology sector. Naturally, in the budget given by the central government of China last March, the allocation to science and technology has been increased by 10 percent to 50 billion or five thousand billion dollars. Allocation to no other sector has increased so much.