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On social media, people repeatedly play down China’s strength by pointing to its relatively small GDP-per-capita, which is about 1/6th of the US. However, this characterization is very misleading and only fools people into false comfort. China’s nominal GDP-per-capita in 2021 was about $12,600, placing it around #60 in the world. Of course, it doesn’t mean that all the other countries above on that list are more powerful and wealthier than China. There are two reasons why: China’s population and Unequal distribution of wealth.
Impact of Population
Did you know that China is now the richest country on earth, measured by net worth? According to McKinsey, China’s net worth is staggering $120 trillion, compared to USA’s $90 trillion!
How’s that possible?
It’s the power of population. (Some say that it’s because of the real estate bubble in China. There’s some truth to it, but who doesn’t have real estate and/or stock market bubbles?)
China’s population of 1.4 billion people means that its GDP is #2 in the world — $17.7 trillion in 2021 — even with a small GDP-per-capita. The GDP, in turn, translates to more government spending power, more consumer power, more military power and so on. For example, the Chinese government’s revenue is whopping $3.2 trillion, the same as India’s entire GDP. Similarly, China spends about $440 billion a year on research and development (R&D) and $300 billion on military.
The retail market in China is staggering $6.5 trillion, which is larger than the GDP of Japan and Germany!
China is #1 in the world in numerous areas — foreign exchange reserves, banking system, real estate assets, exports, trade, patents, publication of scientific papers and so on. It goes without saying that China is world’s #1 in manufacturing — including production of steel, cement, electric cars, solar panels, and 200 other vital commercial and industrial products.
Finally, China’s large GDP and hence the tax revenue allowed the CCP to build amazing infrastructure like 40,000 km of high-speed rail, 8700 km of subway/metro, and 170,000 km of expressways — all #1 in the world, in terms of length.
So, you get the picture. The population amplifies the GDP-per-capita.
Unequal Distribution of Wealth
While 600 million Chinese earn only about $200 a month, there is a lot of inequality in China. Thus, foreigners who are stuck in the “China poor” narrative don’t realize how wealthy many Chinese are.
China has the world’s largest middle class. Among the top 10% of the wealthiest people in the world, there are now more Chinese than Americans! China has more than 5 million millionaires, only second to the US. And there are 600+ Chinese billionaires.
This is why “poor China” is the largest market in the world for luxury cars like BMW and a close #2 market for Tesla. Many people would be shocked to find that Chinese buy more BMW than Americans and Europeans combined! As for Mercedes-Benz, its sales in China in 3x as large as the sales in America!
China is also the #2 market for personal luxury goods. When I was in China, I saw luxury stores of Gucci, Prada etc. everywhere. And there were more Porsche in Shanghai than in the San Francisco Bay Area.
Regional GDP-per-capita Differences
There are also vast differences among Chinese provinces and cities. If you go to Shanghai, for example, you certainly feel like you’re in a developed country. Maglev trains, bullet trains, skyscrapers, world-class subways and roads, fancy hotels and restaurants, luxury malls etc. will make you forget that you are in a developing country.
Take the top four cities: Beijing, Shanghai, Shenzhen, and Guangzhou. Together, they have a population of 82 million, which is larger than the population of countries like the UK or France. These four cities combined would be the 20th largest country in the world, just behind Germany. And the nominal GDP-per-capita of this combined entity is $27,000, making it richer than many European countries like Greece, Portugal, Poland, Hungary, and Czech Republic!
Thus, there is a “rich China” within communist China. While the GDP-per-capita of the whole nation is a fraction of that of America or Western Europe, the combined GDP as well as a large segment of wealthy population make China a superpower and a geopolitical peer competitor of the US.
— Chris Kanthan