Get Used to It, America: China Now No. 1

Get Used to It, America: China Now No. 1. By Noah Smith.

In purchasing-power-parity terms, China’s economy became the world’s largest in about 2013 …

The economies of China and the U.S. are now fairly evenly matched in size. But with four times the U.S. population, China has more room to grow. And China is already the world’s largest manufacturer and biggest exporter. …

The biggest effect will be that China becomes the leading beneficiary of what economists call agglomeration effects. Agglomeration refers to the tendency of businesses to cluster together in the same region, because one company’s workers are another’s customers. As economists Paul Krugman, Masahisa Fujita and Anthony Venables showed two decades ago, agglomeration can bring big benefits to whatever region has the densest concentration of economic activity. …

This process is accelerated by another phenomenon known as clustering effects — the collection of a huge repository of manufacturing talent and know-how in Chinese cities. China’s general hostility to foreign companies will slow this process, but the gravitational pull of the world’s biggest economy will be hard to resist. …

Another result of China’s new economic heft is that the web of institutions that the U.S. built to regulate the global economy after World War II will be increasingly irrelevant and toothless. The World Bank, for example, which lends money to poor countries, is already finding itself sidelined as Chinese loans pour into developing nations. …

The final impact of China’s economic rise is geopolitical. Countries that once would cater to the U.S. in military and political matters in order to secure access to U.S. markets will now be tempted to switch their allegiance to China. This pressure will be especially acute for East Asian countries that are close to Chinese markets.

It’s a new world. Fine time for western elites to get a case of stupid incompetence, chasing PC fantasies and diversity while our rivals get ahead by pursuing meritocracy.

A reader writes:

It seems me that the present development in China is turning to a more dictatorial, top down government in the spirit of Stalin and Mao. As several 100 millions now have some ideas about the Western world this will not be an easy transformation.