Is China a developing nation?

It won’t take long to answer this question. Therefore most of this post will be devoted to considering why this is even an issue.

Consider the following Bloomberg headline and subhead:

Who Thinks China’s Not an Economic Powerhouse? China

One of the hottest topics at the upcoming global climate conference is whether China should still be considered “developing.”

According to the IMF, China’s per capita GDP in 2024 is estimated at $13,136 well below the $85,373 figure for the US, and even below Mexico’s $15,246.  In PPP terms, China’s GDP is $25,015, again, slightly below Mexico.  China is clearly a developing country.  So what’s going on here?

In recent years, the US government has adopted an adversarial relationship with China, and most of the media has fallen in line with this agenda. This attitude colors the way the media looks at all sorts of issues.  Consider the following two examples:

1. When the Chinese government reports strong GDP growth, much of the media is immediately skeptical.  Experts are cited who claim that the official Chinese figures are inflated.  Studies using satellite data of nighttime illumination suggest that China is much poorer than it claims to be.  

2.  When China is viewed as a threat to the national security of the US, or when China is expected to contribute money to the fight against global warming, then China is viewed as an advanced economy, indeed a “powerhouse” economy.

There doesn’t seem to be any “fact of the matter” when it comes to China’s development status.  Rather it is regarded either as a backward developing country or an advanced developed country according to whether that status advances a particular argument being made by powerful special interests. 

If the goal is to show that China has a bad government, then obviously it is inconvenient to report stellar rates of economic growth.  If your interest is convincing the public that China is a formidable competitor to the US, then obviously it is inconvenient to report that China is merely a developing country.

This is how I read the Bloomberg headline and subhead.  At the moment, it is convenient for the US government to have China viewed as an economic powerhouse.  But not always.  If reports of rapid Chinese economic growth lead other developing countries to begin seeing China’s system as worth emulating, then it’s time to point out that the GDP figures are probably inflated and China’s economic system is actually quite inefficient.  China is much poorer than its government claims.

I don’t hold either view, as I don’t have an agenda.  I believe that China has grown very rapidly since Maoist economic policies were replaced with market reforms.  I believe that China is every bit as rich as its government claims, probably even richer.  (Richer than Mexico.) I trust my own eyes much more than I trust satellite models of an economy.  But I do not believe that China is a fully developed economy.  It still trails the US by a very wide margin, and will continue to trail the US for the foreseeable future.  Indeed, China still trails other East Asian economies like Japan, South Korea, Taiwan, and Singapore, largely because its government remains too heavily involved in the economy.

In my view, China is not a threat to America’s almost complete dominance of the 21st century global economy.  Indeed, with the rise of high tech that dominance is becoming ever more entrenched, with the US share of global stock market capitalization having recently risen to an astounding 61%.  At the same time, I understand why some people have alternative views.  China is a major player in many industries, especially manufacturing.  But whatever your view, it is important to avoid motivated reasoning.  Whether China is or is not a developed country does not depend on whether that fact advances an argument that you happen to be making at this moment in time.