Pays to be poor

Why China doesn’t want to be the world’s largest economy yet

April 30, 2014
April 30, 2014

Among those who doubt the World Bank’s estimate that China’s economy is set to surpass America’s as early as this year is Beijing itself. Although China’s National Bureau of Statistics (NBS) participated in the study, the agency, which oversees all of the country’s official data, did not agree with World Bank’s conclusion. “[T]he NBS of China does not endorse these results as official statistics,” The World Bank reports (pdf, p. 29).

China’s leaders have consistently downplayed such economic milestones. When China became the world’s largest exporter in 2009, passing Germany, Chinese economists described the development as “not surprising,” given the size of China. Officials were also mum when China outpaced the US last year to become the biggest trading nation in the world. And when asked about China’s expected eclipse of the Japanese economy in 2010, the director of the NBS merely pointed out that China is still one of the world’s poorer countries (paywall).

As the Associated Press points out, such shows of modesty may be calculated to help China avert more outside pressure to take on financial sector reforms, make trade concessions, or cut back on production to curb greenhouse gas emissions. When China’s GDP passed Japan’s on a quarterly basis in 2010, the state media published criticisms of what it called Western “China responsibility theories” that stressed China’s new global role. Some said the theories were meant to “slow down and check China’s development.”

China’s classification as a developing country has helped it avoid international obligations to cut greenhouse gas emissions, of which it is the world’s largest emitter. In terms of economic reform, the World Bank, among others, have repeatedly warned Beijing to reform state-owned enterprises, taxes, and its welfare system in order to become a high-income country. Others say that China’s fast rise takes away from its longstanding narrative of being a victim, bullied by foreign powers such as Japan, the US, and European countries.

Moreover, highlighting the country’s economic might only serve to paint in starker contrast the inequality and low income among its people. The Chinese have about a tenth of the spending power that the average American has, and about half of the world’s average. In terms of gross national income, China is only slightly richer than Namibia, and poorer than Peru.

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