USA vs. China: what is the world's superpower?

A.V.
English Section / 7 octombrie

USA vs. China: what is the world's superpower?

Versiunea în limba română

The US and China are two great powers of the world, but their sources of power vary significantly, according to a Ray Dalio analysis (Great Power Index 2024) that identified eight basic pillars that measure a nation's types of strength. These pillars are: trade, innovation and technology, education, economic power, the military, the financial center, competitiveness, the status of the international reserve currency.

Comparing the US and China, the analysis - taken by visualcapitalist.com - shows that America has an unrivaled status in the capital markets, and the dollar's status as a reserve currency shows little sign of being surpassed any time soon. Meanwhile, China's influence in international trade has grown substantially, with the Asian country now being the main trading partner for 120 countries around the world.

The Ray Dalio calculation for the pillars mentioned above was done using the standard Z score. This expresses how many standard deviations below or above the mean a raw score is. It can be obtained by dividing the difference between a score and the mean by the standard deviation of the sample. The mean of Z-scores is always 0 and the standard deviation is always 1.

According to Ray Dalio, as an overall power, the US scores 0.89, higher than China's 0.80. In the education chapter, the USA has a score of 2; and China by 1.6; on the innovation and technology pillar, the USA benefits from a score of 1.9, and China from 1.8; on the competitiveness side, the USA has a score of -0.4, China 1; in the military field, the USA benefits from a score of 2.1, China from 0.9; in the trade chapter, the USA's score is 1.3, China's 1.7; as an economic power, the USA has a score of 1.7, China 1.6; on the financial center side, the USA has a score of 2.7, China 0.2; and in terms of currency reserve status, the USA benefits from a score of 1.9; China of -0.6.

As it follows from the analysis, both powers are closely correlated to certain parameters, such as innovation and technology, along with economic power, but at the same time presenting large differences in categories such as the reserve status of the currency and general competitiveness.

It should be noted that in the technology and innovation segment, America is home to the world's largest technology companies, which are leading AI advances, and China is rapidly developing a large part of intellectual property in new industries, such as semiconductors, electric vehicles and advanced manufacturing.

In terms of economic power, the difference between the GDP of America and that of China is about 10 trillion dollars. China could surpass America's economy by 2035, assuming an annual GDP growth of 5%, writes the quoted source, noting that Ray Dalio's own estimates of real GDP growth over ten years show, in China, an increase annual rate of 4%. The Asian country's fragile real estate sector and weak consumer demand are the biggest obstacles to its future growth prospects.

Comparing Education While America's high school education system is a source of concern, its top universities play a key role in the education score. At the same time, China is home to a hundred elite universities, although the country has an uneven education system, with a disproportionate impact on lower-income households.

When it comes to military power, the US has long been the global leader in defense spending, surpassing China more than twice as of 2022. However, the US position is deteriorating. Today, China's military modernization shows defense capabilities very close to those of America, perhaps even greater than them, according to sources such as the Global Firepower Index.

In addition, China is increasingly expanding its alliances with Russia, Iran, and North Korea through arms transfers and battlefield exercises, posing a greater risk to America's military dominance.

We remind you that the US economy grew by 3% in the second quarter of 2024, at an annual rate, a rate that exceeded analysts' expectations. In the same interval, China's economy registered a 4.7% advance, lower than market estimates.

Experts in China cut their forecasts for the country's economic performance this year to an average of 4.8%, from 4.9% in July, according to the latest quarterly survey by Nikkei, cited by macaonews.org . The 25 economists who provided full-year forecasts took into account the Chinese government's recently announced stimulus rollout, designed to get the country back on track to meet its official growth target of about 5 percent.

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