What If China Were The World's No. 1 Economy?
ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
This week, China inched ahead of Japan, becoming the world's second largest economy. It still lags behind the U.S., but probably not for long. Economists estimate that China will be the largest economy on Earth in perhaps as little as 20 years. Today, our Planet Money team asks: What will it be like for the U.S. to be number two?
Here are David Kestenbaum and Chana Joffe-Walt.
CHANA JOFFE-WALT: This whole thing is becoming messy. We hear China is going to bump us from the number one slot. That feels like a bad thing. So we worry about it.
DAVID KESTENBAUM: And then the Chinese worry about why we're worrying about it.
Here is Wing Thye Woo. He teaches economics at UC Davis, but travels to China a lot. This is what he hears there.
Professor WING THYE WOO (Economics, University of California, Davis): They say, why are you so suspicious of us? You think we're out to get you?
(Soundbite of laughter)
Prof. WOO: Now, when we start getting rich, you are in fear of us. Are you going to do something that will prevent us from catching up with you?
JOFFE-WALT: So let's try to clear the air a bit. What would a world where China is the largest economy actually look like?
We asked Adam Posen, an economist at the Peterson Institute.
Dr. ADAM POSEN (Senior Fellow, Peterson Institute for International Economics): Well, you would wander around large parts of China and see parts of China that, in terms of development and technology, look exactly identical to U.S. cities. Second, there would be a sense of this international buzz, not just at these summits and G-20 meetings but, you know, just in terms of the Olympics or...
KESTENBAUM: Does this mean also that we end up watching a lot of Chinese television with subtitles?
Dr. POSEN: Probably, or maybe dubbing. I don't know. Culturally, if there is...
JOFFE-WALT: Do you really think we're going to be watching "The Bachelor" in Chinese?
Dr. POSEN: Oh, I don't know if it would be "The Bachelor," but there's going to be an awful lot of bachelors in China, because they got many more men than women, so it's going to be pretty competitive.
JOFFE-WALT: Posen says since China would be more dominant, in the U.S., we can expect more angst.
Dr. POSEN: What did we do wrong? Can we learn from the Chinese, the Chinese way to success?
KESTENBAUM: So we'll be sort of like England. We'll have to develop a very good, slightly sarcastic sense of humor about how we used to be great.
Dr. POSEN: That's the way of all things. I mean, the Spanish had to do that after the 1700s. The French had to do that after the 1800s.
KESTENBAUM: Chana, that doesn't sound terrible.
JOFFE-WALT: Well, I can think of a couple of things that seem unsettling about this future.
KESTENBAUM: Let's hear.
JOFFE-WALT: Global warming.
KESTENBAUM: That's a fair one. Both economists mentioned environmental concerns.
JOFFE-WALT: Right. And we don't always agree with China, politically.
JOFFE-WALT: And I think, economically, our instinct is to think that global economics works like a Monopoly game: More money for you means less money for me.
KESTENBAUM: Okay. Wing Thye Woo says that's a natural feeling, but it's wrong. What actually happens is the whole pie gets bigger.
Prof. WOO: No, it's not a zero-sum game. In fact, we want the Chinese to be rich, educated and prosperous, so that they become innovative like us. Then they can contribute to the global stock of knowledge. That would make us all better off.
KESTENBAUM: Maybe a Chinese scientist will cure cancer.
JOFFE-WALT: Okay. But it's not just that it feels good to be important. There's a real economic power that comes with that. When people in the world feel panicky and worry about where to put their money, they come to us. They buy U.S. bonds. We are the world's mattress, which allows our government to borrow money cheap. The dollar is what economists call the reserve currency.
KESTENBAUM: Adam Posen says, again, reasonable thought, but, to him, it's not an immediate concern.
Dr. POSEN: China is not necessarily going to displace that, because they have to not only be big, they have to have capital markets that you're confident you can get your money in and out of. I mean, Japan has been the second biggest economy for 30 years, and the yen never became a reserve currency.
JOFFE-WALT: Adam Posen argues that the biggest change will not be for us moving from number one down to number two, but for the people of China moving up. The standard of living there will increase quickly and dramatically.
KESTENBAUM: But not as much as you might think. Even if China's GDP grows larger than ours, that wealth will be spread out over a lot more people - more than a billion people. Their GDP per capita, per person, will be less than half of what it is here in the United States.
JOFFE-WALT: In today's terms, about the equivalent of Equatorial Guinea.
I'm Chana Joffe-Walt.
KESTENBAUM: And I'm David Kestenbaum, NPR News.