US-China relations: Is Biden’s stimulus plan enough to stop China becoming the world’s leading economic power?

US President Joe Biden pledged in March he would prevent China becoming the world’s ‘leading’ and ‘wealthiest’ country

But economists say in the long run no amount of spending or tailored growth policies will stop China from surpassing the US

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China’s pre-pandemic US$14 trillion economy could overtake the US$21 trillion American economy as early as 2028, economists say. Photo: AP

Published: 10:00pm, 3 Jun 2021Updated: 10:42pm, 3 Jun 2021

When US President Joe Biden proposed his US$1.9 trillion coronavirus relief package to jump-start the world’s largest economy in January, he might also have had China on his mind.

Two weeks after the package was approved by Congress in March, Biden said he would do everything in his power to make sure China did not become the world’s most powerful country.

But will Biden’s stimulus be enough to stave off China’s rise or will it fall short?

Since China’s post-pandemic economic growth is already showing signs of peaking, and the US economy is accelerating, it is possible the American growth rate could race ahead in the next few quarters, widening the gap between the size of the two economies.

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But economists say that in the long run, no amount of spending or tailored growth policies will be able to stop the Chinese economy from surpassing America’s, although other indicators such as wealth, measured by gross domestic product (GDP) per capita, will remain above China’s for the next 50 years.

“In general, there is little in Biden’s stimulus to date that is going to increase the long-term US potential [GDP] growth rate – it remains stuck by most accounts at roughly 1.8 per cent a year – and as such, the stimulus has merely avoided a deep depression during the pandemic, rather than essentially putting the US on any higher long-term growth trajectory,” said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics (PIIE).

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