I think if you go by PPP, then there is a better than 65% probability that 2X US economic size can happen.
There are 3 major factors here:
1.
China climbing up the value chain: Probability 100%, since we are already seeing it happen in real time. Everything from NIO, Xpev, Hongqi, Ehang and SOLO to Huawei and DJI.
2.
The increase purchasing power of the RMB vs. the USB and the compounding effects of capital: Probability 75%.+ If you read Macropolo.org's detail analysis of the 14th 5 year plan
, you can see that attracting foreign investment and increasing domestic Chinese consumption is a distinct goal of this plan. The 14th plan will lay the ground work for the evolutionary plans to come. So as long as they can make this 5 year plan work, everything else will fall into place. It is the perfect window in terms of crossing from the internet 2.0 phase to the comprehensive IOT phase of modernization. Can they do it?
- Their closest competitor, the United States, will need until at least Q3 2023 to get back to 2019 state of normalcy. Don't take my word for it, take it from McKinsey's
. We/USA are on a B2 trendline in terms of recovery, the charts are on page 66.
- China has laid all the ground work in terms of 5G and national confidence (boosted by COVID-19), necessary for execution.
- No one else has the scale nor the comprehensive planning and execution capability and authority to out compete them.
So yea, I think they will pull off the 14th year plan. And with that, it will set everything into motion, such as devaluing of the USD, and decreased US competitiveness.
3. Precipitous US decline:
Probability 50%+ US is in the shit right now. The politics are not going to help.
It could play out as follows. Note, China significantly undercount its GDP, it real nominal GDP is probably somewhere around $17T, and not the $14T it claims. Likewise, I think US GDP is a bit bloated, and likely around $18T, boasted by over inflated legal and medical service "productivity".
Year | USA | China |
2020 | 20 | 14 |
2021 | 19.4 | 15.12 |
2022 | 18.818 | 16.0272 |
2023 | 18.25346 | 16.98883 |
2024 | 18.61853 | 18.00816 |
2025 | 18.9909 | 19.08865 |
2026 | 19.37072 | 19.8522 |
2027 | 19.75813 | 20.64629 |
2028 | 20.15329 | 21.47214 |
2029 | 20.55636 | 22.33102 |
2030 | 20.96749 | 23.22426 |
2031 | 21.38684 | 24.15323 |
2032 | 21.81457 | 25.11936 |
2033 | 22.25087 | 26.12414 |
2034 | 22.69588 | 27.1691 |
2035 | 23.1498 | 28.25587 |
USA: I applied a modest 3% GDP decrease until 2024. Then a highly aggressive 2% increase from 2024 to 2035
China: I applied an 8% increase to 2021, then 6% from 2022 to 2025. Then a 4% increase from 2026 to 2035
A more aggressive scenario could be:
Year | USA | China |
2020 | 20 | 17 |
2021 | 19 | 18.7 |
2022 | 18.43 | 20.196 |
2023 | 17.8771 | 21.81168 |
2024 | 18.05587 | 23.12038 |
2025 | 18.23643 | 24.5076 |
2026 | 18.41879 | 25.73298 |
2027 | 18.60298 | 27.01963 |
2028 | 18.78901 | 28.10042 |
2029 | 18.9769 | 29.22444 |
2030 | 19.16667 | 30.39341 |
2031 | 19.35834 | 31.60915 |
2032 | 19.55192 | 32.87351 |
2033 | 19.74744 | 34.18846 |
2034 | 19.94491 | 35.55599 |
2035 | 20.14436 | 36.97823 |
Again, not quite 2X, but certainly not impossible. Toss in a 30% devaluation of USD to RMB exchange rate, and that 65% quickly becomes closer to 85%.
The only thing that could fuck up the Chinese is a war in Taiwan. But they are not that stupid. They could apply financial sanction to the island after they have reach technological parity in semiconductors, then just wait until Uncle Sam is exhausted, then come and mop up after 2035.
On the other hand, there are shitloads of factors that can trip up US, such as:
- COVID containment and return to normalcy,
- domestic unrest and terrorism
- political gridlock
- another Trump
- tax revenue shortage in its major urban centers
- increase cost of deficit spending
- USD devaluation
- Euro and RMB gaining up to bypass SWIFT