Local maps tell a story. If you open a map produced in Britain, there we are, right bang in the centre of the world. Open a map in Australia and there’s Canberra right in the middle. Maps convey a subtle sense of “our place in the world” and it can look very different from the geographical perspective of competing nations.
The combined population of the “Western” economies, principally Europe and the US, is barely 10% of the world’s total population. The vast steppes of Asia are home to 60% of humanity with the two behemoths of India and China alone accounting for 36% of world population and, according to “World Economics”, for over a quarter of world output. By comparison, on the same basis, the US accounts for 12.5% and the UK just 2% of global GDP.
It is one of history’s conundrums that whilst Britain, France, Spain, and the Netherlands spent the 15th to the 20th centuries fighting each other for supremacy over the Americas, the Indian subcontinent, and the “Indies”, China remained insular and quiescent.
Just as Britain came to dominate the trans-Atlantic trade “triangle” in the 17th and 18th century, by the time Columbus discovered America in 1492, in a boat barely 25m long, Admiral Zheng-He had conquered the trade routes between Africa, Socotra, India, and the Indonesian archipelago in ships, perhaps, 10 times the size of the caravels that transported Columbus and his crew across the western ocean.
Yet, after the death of Zheng, China appears to have withdrawn from regional trade closing-up behind the Great Wall until its industrial re-emergence of the last 50 years.
Unquestionably, the change in China throughout its “accelerated industrial revolution,” has been astonishing.
In 1970, China produced goods and services to the value of USD92 Billion. In the same year the US produced goods and services to the value of US 1Trillion. Immediately prior to the “Japanese decade,” the GDP of Japan was USD212 Billion.
Roll the clock forward and today the numbers read: US $23T, China $18T, and Japan $5T (unchanged since the unwinding of the Japanese property bubble of 1989).
Put more simply, in the space of a single lifetime, China has moved from being one of the smallest economies on earth to the second largest (and, on some measures, the largest economy) on earth.
The impact of that growth on the world economy has been earth-shaking with China thought to be largely responsible for the great disinflation of the last twenty years as it flooded the world economy with cheap goods produced by an army of cheap labour. There have been many headlines proclaiming the “dawn of the China century.”
But just maybe, as the voyages of Zheng-He signalled the apogee of the Ming dynasty, these headlines tell us more about the past than the future. For all the exceptional growth of the last fifty years, the Chinese economy seems to be running out of steam.
In common with Japan, albeit for different reasons, China has a well flagged demographic problem; it is one of the oldest societies on earth with the UN suggesting that China’s population may fall from 1.4bn today to less than 800 million by the turn of the next century.
Equally, the deteriorating geo-politics of world trade, on top of the impact of the Covid lockdowns, is beginning to have an effect. Growth in China’s trade, both export and import, has been falling since 2021 and shrinking since 2022. It seems also that, again like Japan, the economy has reached the limits of “investment led growth” without a corresponding rise in domestic consumption growth, which is to say, higher wages.
Nevertheless, capital flows are still moving inexorably eastward. The growth potential of Asia as living-standards improve cannot be discounted.
Importantly, the two large economies of India and Indonesia with their youthful populations are expanding at pace, accompanied by Vietnam, Thailand, and Malaysia, and are well placed to step into the gaps left, dare one say, by China’s relative decline.
It may not be the China century after all, but it is still more than likely to be the Asian century.
