America’s Declining Economy And The Rise Of China

We can all agree that the United States of America has become one of, if not the most powerful economy in the world today. It has faced a lot of challenges and trials.

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At the start of the twentieth century, America wasn’t the world power it is today. But fast-forward many years later and you will realize that a lot has happened since then.

It was able to get past its dysfunctional financial system and greed-powered politics. Now, it has united together to overtake many other economies. We can say that it has become a very dominant empire in the world today. But if you have been following the growth of this powerful country in recent times, you will notice that it has started to slow down in recent years, giving other countries like China and India the advantage. These countries were nowhere near America a few years ago, but now we can say that America is now struggling to keep up with them.

The average GDP growth rate of the USA over the last decade has been recorded at two percent. However, taking a look at China and India, you would agree that they are growing at almost three times that number in recent years. Judging by these statistics and findings, only one question seems to come to mind;

Is this the end of a once all-powerful economy of the U.S. empire and the resurgence of the Chinese Dynasty?

Let us start by asking what made America so great and why is it the current superpower of the world? How can you explain that a country with less than five percent of the world’s population generates and earns more than twenty percent of the world’s income? Well, it all boils down to those key areas that they handle effectively. What are those areas? Finance, Insurance, and Real Estate.

A careful look at the percentage generated to the GDP of America shows that finance, insurance, rental, leasing, and real estate had the highest percentage. The biggest contributors to the GDP (gross domestic product) by industry are Finance, Insurance, Real Estate, Rental, and Leasing are Wells Fargo, JP Morgan, and Bank of America, insurance (GEICO, United HealthCare, and CIRGO). These areas are so important to America that the Government helped them not to collapse in 2008.

Another area that is so important to the economy of the US is professional and business services. Even though finance, insurance, rental, real estate, and leasing take about 22.3 percent, this particular sector has taken a little over 12.8 percent. This money comes from lawyers, accountants, Amazon Web Services, Facebook Advertising. The government of the country also contributes its own quota, which is about 12.6 percent.

We have things like MEDICAID and MEDICARE, pension and retirement, education, tourism, welfare, all these contribute to the total from the government. Manufacturing is another sector that contributes to this by a massive 10.8 percent. Whatever is manufactured and sold has contributed to this quota. Even though they have a strong manufacturing industry, they are nowhere near China.

Did you know that since 2019, China, alone, has accounted for more than twenty-eight percent of the manufacturing output of the world? This is worth more than four trillion dollars. The United States comes second with a little over sixteen percent, and Japan makes up the top three with about seven percent. However, America has one little advantage over China; they are a little more technologically advanced, even though technological advancements have spread all over the world today.

We can say that Apple is arguably one of the biggest technological companies in the world with the USA being the country. Huawei may be the second-largest and may belong to China, but it is nowhere near Apple. Do we talk about Facebook? This is an international company that has almost three billion monthly active users. The same goes with Twitter and Instagram, the biggest chat platforms in the world are American.

Even though China has its own form of social media in the form of Weibo and WeChat, they are not global but purely Chinese. However, TikTok is beginning to bring the Chinese presence in the world of social media to the big stage, and it is already looking like a big plus to China. This particular app is gaining so much popularity that it is only a matter of time until they become one of the best.

Summing everything up, be it the manufacturing, insurance, finance, social media, and technological advancements, you will discover that China is actually growing at a much faster rate as compared to the United States. In fact, their growth is so rapid that some analysts are predicting that China might overtake America as the biggest economy by the year 2028.

Do you think this is possible or not? Well, we just have to wait to find out, right? After this pandemic, some analysts have predicted that the value of the Chinese economy, when compared to dollars, will exceed that of the United States before the year 2028, half a decade sooner than it was predicted just over a year ago.

This is because China was able to handle the pandemic crisis a lot better than the United States. Initially, they lost a lot of people but they were able to handle the situation, and in the end, they did a lot better than the United States.

The economy of the US contracted by around three percent last year, and this has been touted as the largest decline since world war two. China had a GDP growth of 2.3 percent, going from fourteen to almost fifteen trillion in the last year despite all the lockdowns and economic challenges the world faced last year. America’s unemployment rate spiked a whole lot that even when it settled to the current rate, it is still almost double what it was before the pandemic.

Meanwhile, China’s unemployment rate rose a mere one percent during the pandemic. So it is fair to say that the economic situation of the United States was worse than that of the Chinese in light of recent events. These are all short-term trends, let us turn our attention to the long-term trends.

In terms of population, America has only about three hundred million people, as opposed to China which has more than one billion people. So from the population standpoint, it is clear that the US cannot keep up with the manpower that China has to provide, meaning that they may not be able to keep up with the growth of the Chinese.

Elon Musk, the popular tech billionaire, believes that it is only a matter of time before China tops the US in terms of almost everything. He said that economics is the foundation of war and that if your counterparty’s resources are bigger than yours, you need to be a lot more innovative, or you are not winning the war.

In China’s case, a person can be twenty-five percent less efficient in production and manufacturing, and they will still beat the US. If China decides to bring their poor and middle-class population up to a good standard in a short time, they will definitely overtake the US. China has been doing so recently, moving their poor to a middle class, the middle class to rich, and the rich to wealthy. The problem is they have so much to do to bring people up to speed.

China has more room for growth as compared to America. Even though America is more mature in terms of stability, government, and economy, and has been dominant for years, we can say that China is really on the move. Ray Dalio and other investors have started to shift their investments from America to China. He has a lot of principles to support his decision. In fact, he believes there is a changing world order happening today.

He has explained that the times ahead will be a lot different from the ones we have seen before, even though there will be some similarities to other historic times.

He believes there are three phases in the rise and fall of an empire; the ascent, the top, and the inevitable decline. Discussing the top and the decline phases, we can say these things;

Periods of success lead to more earnings, leading to more expenses, and then less competition when compared to those who earn less.
Those who are successful run the risk of being copied or imitated by the emerging competition.
The leading economy may continue to extend the empire until it is not economically feasible to defend or support anymore because the cost of maintenance becomes bigger than the revenue generated by the economy.
When debts become larger, when banks begin to lose the ability to stimulate economic growth, and when the economic decline occurs, it may lead to printing more money, leading to a devaluation of the currency.

In the end, these signs are beginning to surface in the US, indicating that this may be a slowdown of the economy as a whole, while China keeps expanding. America has a lot to do and they have to do it fast to avoid destroying the economy that many generations have labored to build. Please make sure to subscribe to our platform, like and share the blog, and let us know your views and thoughts.

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