STR / AFP / GETTY IMAGESBut can you make a semiconductor? A factory in Anhui Province, China, May 2015.
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The Overlooked Importance of Corporate Power
By Pankaj Ghemawat and Thomas Hout
Despite China’s recent economic struggles, many economists and analysts argue that the country remains on course to overtake the United States and become the world’s leading economic power someday soon. Indeed, this has become a mainstream view—if not quite a consensus belief—on both sides of the Pacific. But proponents of this position often neglect to take into account an important truth: economic power is closely related to business power, an area in which China still lags far behind the United States.
To understand how that might affect China’s future prospects, it’s important to first grasp the reasons why many remain bullish on China—to review the evidence that supports the case for future Chinese dominance. At first glance, the numbers are impressive. China’s GDP is likely to surpass that of the United States—although probably not until at least 2028, which is five to ten years later than most analysts were predicting before China’s current slowdown began in 2014. After all, China is already the world’s largest market for hundreds of products, from cars to power stations to diapers. The Chinese government has over $3 trillion in foreign exchange reserves, which is easily the world’s largest such holding. And China overshadows the United States in trade volume: of the 180 nations with which the two countries both trade, China is the larger trading partner with 124, including some important U.S. political and military allies. Finally, China has made steady progress toward its goal of
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