Has China “peaked” ?

CAMBRIDGE – THE failure of China’s zero-Covid policy is leading to a reassessment of Chinese power. Until recently, many expected China’s GDP to surpass that of the United States by 2030 or soon thereafter. But now, some analysts argue that even if China achieves that goal, the US will surge ahead again. So, have we already witnessed “peak China”?

It is just as dangerous to overestimate Chinese power as it is to underestimate it. Underestimation breeds complacency, whereas overestimation stokes fear; but either can lead to miscalculations. A good strategy requires a careful net assessment.

Contrary to the current conventional wisdom, China is not the world’s largest economy. Measured in terms of purchasing power parity (PPP), it became larger than the US economy in 2014. But PPP is an economist’s device for comparing estimates of welfare; even if China someday surpasses the US in total economic size, GDP is not the only measure of geopolitical power. China remains well behind the US on military and soft-power indices, and its relative economic power is smaller still when one also considers US allies such as Europe, Japan, and Australia.