China's economy is rapidly converging on developed country status, with its per capita GDP increasing significantly. Since 2010, China's per capita GDP has gone from about 10% to 40% of Japan's per capita income. However, it is important to note that the weak yen overstates China's advance. Japanese workers, on the other hand, have experienced a decline in wages compared to their American counterparts. In the mid-1990s, Japanese workers were almost twice as well paid as American workers, but today they are just over 1/3 as well paid [9b782fa0]. Despite the mediocre state of the Japanese economy, China's rapid development is evident when visiting the country. While China as a whole is still considered middle income, significant portions of China already exhibit signs of being quite developed [9b782fa0].
China's economy, measured in terms of GDP per capita, is lagging behind the US and UK. UK citizens are almost four times as wealthy as their Chinese counterparts, and US nationals are around six times better off. The GDP per capita in the UK is $46,125, in the US it is $76,329, in China it is $12,720, and in Russia it is $15,270 [ff67016e]. China's economy had been expanding rapidly for decades, but since the COVID-19 outbreak, it has struggled to regain its previous growth. The challenges it faces include a real estate sector in crisis, a shaky stock market, high youth unemployment, and the threat of deflation. China's economy heavily relies on real estate, which accounts for roughly 20% of its economy. The country's biggest private developer, Country Garden, and debt-laden rival Evergrande have faced financial difficulties. Some economists believe that China's official growth figures are fabricated, and the real growth rate could be as low as 1-2%. Premier Li Qiang has set a target of 5% growth for China in 2024 [ff67016e].
China's economic growth rate is projected to be 4.7% in 2024, lower than Beijing's official target of 'around 5%'. Economists predict a further downturn in the years ahead, with growth rates of 4.4% for 2025 and 4.2% for 2026. The sluggish housing market and a lack of sufficient policies to stimulate demand are cited as reasons for the slowdown. The real estate slump is seen as the most significant challenge, given that China's property sector accounts for 50% to 60% of household assets. Economists suggest that supportive policies will be needed to reach the 5% growth target. Concerns are also raised about the limitations of fiscal policy measures and the need for more to boost consumer confidence [ff2ed582].
China is still considered a developing country despite its progress in building a moderately prosperous society. The United States has challenged China's developing country status, but major international organizations still classify China as a developing country. China does not qualify as a high-income country based on World Bank standards, and its GNI per capita is still in the upper-middle-income range. The size of China's economy does not determine its development level. Purchasing power parity (PPP) exaggerates the size of developing economies. China's overall development level is still below that of developed countries, with unbalanced development and challenges in areas such as employment, education, healthcare, and housing. China will continue to fulfill its global responsibility as a large developing country and contribute to South-South cooperation [544da943].
China has yet to join the 'rich country' club. Predictions that China would reach high-income status by 2022 have not come true. China's gross national income (GNI) per capita was $12,597 in 2023, more than $1,000 behind the international threshold of $13,845 defining a high-income country. China is at a crucial juncture to breach that gap, but increasing economic containment from the United States and its allies threaten its transition to a tech-driven and green society. Some analysts argue that China needn't care about joining the rich country cohort given the 'olive-shaped' stratification of global incomes. However, maintaining economic growth could be different from making China's people richer, as a large share of the country's GDP comes from fiscal revenue and income distribution is uneven. China also faces challenges in achieving its goal of becoming a 'moderately developed country' by 2035, including underdevelopment of human capital, especially in rural areas [b441b3c8].
Despite these challenges, China's economic growth is still significant. It is likely to continue contributing about a third of the world's economic growth and increase its economic footprint, particularly in Asia [bd5e289d]. China is highly likely to surpass the US as the world's largest economy around 2035 if it sustains an annual GDP growth rate of approximately 5 percent in the coming years [8c287f2a]. Chinese officials attribute the narrowing gap between China and the US to China's sustained high economic growth and peaceful rise [13343874]. However, economists are uncertain about China's prospects for surpassing the US as the world's leading economic power, and recent downturns and setbacks have raised doubts about China's ability to maintain its rapid growth [11df2b9b]. The outcome of the 2024 US election will also determine the future of China's dream of global economic dominance [8c287f2a] [bd5e289d].
Analysis of nationally representative data shows that earners in the top 0.1% of China’s income distribution experienced an annual income growth of 12% from 1988-2018; The bottom 5% of China’s earners experienced lower annual income growth of 4.9%, but still surpassed the fastest-growing group in the U.S. (3.0% for the top 0.001%); Labor income accounted for 90% of total income among the top tenth of China’s earners; Government redistribution in China has had a limited impact on inequality, resulting in a reduction of the top income decile of only 4% in China, relative to 25% in France and 19% in the U.S.; Incomes have risen dramatically in China over the past three decades, with faster income growth among top earners driving rising inequality; Despite the widening inequality, both the middle class and the poor also experienced rapid income growth; China has relatively high absolute income growth compared to France, the U.S., and Russia; Labor income, not capital income, is the main driver of income growth in China; Government redistribution in China has a limited impact on addressing inequality; Rapid increase in income inequality in China from 1988 to 2018, primarily driven by substantial income growth among individuals at the top; Individuals at the very bottom of the income distribution also experienced remarkable absolute real income growth in China; When overall economic growth stagnates, policymakers should take note as societal tolerance for growing inequality may wane [3bcd4c56].
The Chinese Communist Party (CCP) has long boasted of lifting 800 million people out of poverty, using this claim to justify its authoritarian rule. However, a closer look at the facts reveals that this narrative is largely a myth. In reality, the CCP's tight control over the economy and society has kept a large portion of China's population in poverty for decades. The Great Chinese Famine from 1959-1961 claimed up to 30 million lives. China's GDP per capita ranks 74th globally at $13,100, well below the US at $85,300. Applying a more reasonable poverty threshold, around 40% of Chinese still live at or near poverty. There are huge disparities between China's urban and rural populations. City dwellers enjoy 80% higher incomes on average and better living standards. China's elderly face widespread poverty, with the average pension being a meager $24 per month. China's overall wealth is roughly equal to that of the US in 1960. The CCP's control has impeded China's development and caused immense poverty and suffering. The Chinese people deserve full credit for overcoming poverty, not the CCP. [b834edeb]