According to Financial Times News, China’s average income at market exchange rates is only about 20% of the US level, and about 30% when measured by purchasing power parity. The country’s leadership is deliberately taking significant trade risks despite warnings about relying on external demand in an era of protectionism. Their strategy involves investing an extraordinarily high proportion of GDP while keeping consumption to GDP very low. The goal is to win substantial global market shares in strategic goods to weaken Western economies and gain geopolitical power. This approach aims to create an upward spiral in China’s global status and accelerate income catch-up with developed nations.
The uncomfortable truth about China‘s wealth
Here’s the thing that often gets lost in discussions about China as an economic superpower: the country is still relatively poor on a per capita basis. When you look beyond the skyscrapers and tech hubs, the average Chinese citizen earns just one-fifth of what Americans make. That’s a massive gap that Beijing feels compelled to close, and fast.
Why this trade strategy makes sense to Beijing
So why take such aggressive trade positions that risk alienating trading partners? Basically, China’s leadership sees this as their best shot at rapid development. They’re playing the long game – sacrificing current consumption for future dominance. By flooding global markets with strategic goods like electric vehicles, solar panels, and semiconductors, they can simultaneously weaken competitors while building domestic scale.
What this means for everyone else
Now, this strategy creates some serious headaches for Western economies. We’re already seeing the impact in industries like solar manufacturing and electric vehicles, where Chinese oversupply is driving down prices globally. The question becomes: can Western companies compete when China is willing to operate on razor-thin margins for years?
Is the gamble worth it?
And here’s where it gets really interesting. China’s leadership seems to be betting that short-term trade friction is worth the long-term payoff. But there’s a real danger here – what if protectionist responses from the US and Europe become permanent? The strategy could backfire spectacularly if it leads to China being locked out of key markets. Still, when you’re that far behind, maybe taking big risks seems like the only option.
