President Xi’s push for “common prosperity” to reduce the income and wealth gap and his call at the recent Party Congress for “regulating the mechanism of wealth accumulation” will further dampen entrepreneurship and catalyse capital flight. Financial markets are experiencing a major change in mood on China: post-Party Congress Chinese stock market indices and yuan exchange rates are plunging. Unless the government changes its tune, the trend will be difficult to reverse.
While China’s economy is larger than the US measured according to purchasing power parity (PPP) terms, the Centre for Economics and Business Research forecasts 2028 as the date when China surpasses the US in absolute terms. In my view, this is far from inevitable.
China may be tempted to seize Taiwan for reasons similar to Russia – before its power relative to the US begins to wane.