Peak China?

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, 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.

To be sure, China has been expanding its military capabilities in recent years. But as long as the US maintains its alliance and bases in Japan, China will not be able to exclude it from the Western Pacific — and the US-Japan alliance is stronger today than it was at the end of the Cold War. Yes, analysts sometimes draw more pessimistic conclusions from war games designed to simulate a Chinese invasion of Taiwan. But with China's energy supply exposed to US naval domination in the Persian Gulf and the Indian Ocean, it would be a mistake for Chinese leaders to assume that a naval conflict near Taiwan (or in the South China Sea) would stay confined to that region.

China has also invested heavily in its soft power (the ability to get preferred outcomes through attraction rather than coercion or payment). But while cultural exchanges and aid projects could indeed enhance China's attractiveness, two major hurdles remain. First, by indulging in ongoing territorial conflicts with neighbors such as Japan, India, and Vietnam, China has made itself less attractive to potential partners around the world. Second, the Communist Party of China's domestic iron grip has deprived China of the benefits of the vibrant civil society that one finds in the West....