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Is China Really Not Catching Up?

- January 24, 2012

Daniel Drezner has an interesting post arguing that tales of U.S. decline and China’s ascent are wildly exaggerated. The post contains lots of interesting analysis but this quote from Michael Beckley‘s new article (see here for Andrew Sullivan’s analysis) in International Security had me scratching my head:

The widespread misperception that China is catching up to the United States stems from a number of analytical flaws, the most common of which is the tendency to draw conclusions about the U.S.-China power balance from data that compare China only to its former self. For example, many studies note that the growth rates of China’s per capita income, value added in high technology industries, and military spending exceed those of the United States and then conclude that China is catching up. This focus on growth rates, however, obscures China’s decline relative to the United States in all of these categories. China’s growth rates are high because its starting point was low. China is rising, but it is not catching up.

The assertion that most studies compare China “only to its former self” is inaccurate and undermined by the next sentence, which correctly asserts that many studies compare growth rates in China and the United States. If you do so, you get a by now familiar looking graph that looks something like the following, which I quickly cobbled together from the World Development Indicators:

The conclusion from an exercise like this (and the conventional wisdom) is that China is catching up quite rapidly with the U.S. in overall GDP while China still has much lower GDP per capita than the U.S. but is catching up there too, although this effect is much stronger when you calculate GDP in purchasing power parity (PPP) terms (that is: controlling for differences in prices between China and the U.S.).

Beckley objects to this. He wants us to look at absolute dollar comparisons rather than ratios. As he puts it:

.. the average Chinese citizen is now $17,000 poorer than the average American than he was in 1991.

While this is an interesting, albeit unusual, way of looking at the data, there are also considerable downsides to it.  The first is that arguments about China catching up are really about the 2000s, as Beckley himself acknowledges in the opening paragraph of his article. Measured in PPP terms, the mean income of a Chinese person increased by $4149 whereas the mean American income increased by $2760. So even in dollar terms the conclusion does not hold for the 2000s.

Second, there are good reasons why scholars of international politics generally look at ratios for measures of power projection. It is much easier for a country with a GDP per capita of 30K to bully a country with a GDP per capita of 1K than it is for a country with a GDP per capita of 50K to bully a country with average GDP of 15K. On important rationale for this is actually highlighted by Beckley in his rejection of the use of GDP size as a measure of wealth:

It is, however, important to recognize that GDP is not synonymous with national power, and that countries with larger economies do not necessarily have more resources at their disposal. Half a billion peasants will produce a large volume of output, but most of it will be immediately consumed, leaving little left over for national purposes. As Klaus Knorr argued, what matters for national power is not wealth, but “surplus wealth.”

This is true but the portion that is necessary for subsistence becomes much smaller when you move from 1K to 15K. The claim about surplus wealth does not mean that we should ignore absolute GDP levels as they do contribute significantly to potential power projection. Rather, you need to look at the combination of indicators and think about the ability of the state to extract the surplus for military purposes.

There are other issues that I could mention here but I don’t want to drive the point too far. The article contains lots of other interesting graphs and arguments. It is a useful antidote to “declinists,” as Beckley labels them: people who believe that China will inevitably take over the U.S. hegemonic position and that the U.S. should take drastic measures to prevent this from occurring. Yet, this also points to the biggest problem I have with this article: the intellectual strait-jacket it imposes that forces us to see world politics as a zero-sum game. Here is Beckley’s motivation for trying to answer the question whether China is or is not catching up:

Resolving the debate between these two perspectives is imperative for prudent policymaking. If proponents of the dominant, or “declinist,” perspective are correct, then the United States should contain China’s growth by “[adopting] a neomercantilist international economic policy” and subdue China’s ambitions by “disengag[ing] from current alliance commitments in East Asia.” If, however, the United States is not in decline, and if globalization and hegemony are the main reasons why, then the United States should do the opposite: it should contain China’s growth by maintaining a liberal international economic policy, and it should subdue China’s ambitions by sustaining a robust political and military presence in Asia.

So, if we believe that China is catching up, then mercantilism is the only answer. This neither reflects the conventional wisdom nor prudent policy advice. China “catching up” does not equal China “taking over the world” nor does it equate a future world where Americans can expect to be catering to their Chinese overlords. This may be the view of some alarmists but mainstream analysts can think of many good reasons to maintain a liberal international economic policy even if China is catching up.