The rising share of emerging Asia in global output has come almost entirely at the expense of the G7 countries. Asia’s rising share of global income has been primarily driven China, which helps explain the rise of the US-China antagonism. Just read your Paul Kennedy and Robert Gilpin.
In the 1980s, the world’s leading industrial nations (or G7) accounted for 50% of global GDP on a purchasing power parity basis. In 2022, their share had fallen to 30%. By contrast, the GDP of emerging and developing economies is almost 60% today. Emerging Asia, including China, accounts for the bulk of emerging and developing economy. Emerging Asia’s share of global income makes up 33% versus the G7’s 30%. China alone accounts for nearly 19% of global GDP. The share of all other emerging regions has been virtually unchanged over the past forty years. The share of income of Emerging Europe, Latin America and the Middle and Central Asia not only remain well below 10%, but their shares have barely moved at all in the past couple of decades.
Large growth differentials account for the change in global income shares. China averaged real GDP growth of 8.4% year in the past two decades. India averaged 6.8%. The G7 countries eked out a modest 1.5%. Large growth differentials reflect different levels of economic development with poorer countries benefitting from a greater growth potential due to their greater distance from the technological frontier. Despite their growing shares of global income, per capita incomes remain far below those of the advanced economies. Chinese per capita income (adjusted for purchasing power) is $23,000, compared to India’s $9,000 and America’s $80,000.
During the remainder of the decade, emerging economies in Asia will continue to outperform all other regions, though the extent of this outperformance will heavily depend on China’s performance, which will continue dominats Asian GDP aggregates. All emerging regions will outpace the G7 in terms of economic growth. Emerging Asia will continue to register the strongest growth among all emerging regions and will continue to increase its share of global GDP more than any other region, once again largely at the expense of more slowly growing G7 countries. Although the Middle East and Sub-Saharan Africa are projected to put in a decent growth performance, in aggregate it will fall far short of Asia’s. Growing from a much lower base than Emerging Asia, the non-Asian emerging regions will fail to make any meaningful gains in terms of global income distribution.
According to the IMF, EM Europe and Latin America are set to grow 2.5% over the next five years. The Middle East and Sub-Saharan Africa will generate around 4% growth, and Emerging Asia slightly less than 5%. Emerging Asian growth will heavily depend on China’s near-tern growth trajectory, as China account for more than half Emerging Asia’s GDP. Finally, the G7 countries will grow a little less than 2%. The income share of the G7 countries will continue to slide and reach 27% by 2030, while EM Asia will reach 37%. The income share of Latin America and the Middle East will remain below 8%. Sub-Saharan Africa’s share will remain below 4%. Low, lower-middle and upper middle-income have registered an average real GDP growth rate of 1.6%, 4.2% and 4.6% over the past ten years, while high income countries grew 1.6%. This patterns is not going to change significantly over next decade.
The North Atlantic and the North Pacific will continue dominate global economic production, but the center of gravity will shift, if very slowly to somewhere between China and South Asia during the latter half the century. In the short term, the continued shift from the “West” to the “East” will largely, but not exclusively depend on China’s economic performance. Despite significant challenges in terms of rebalancing its economic growth model, China is highly unlikely to grow less than the United States or the G7 countries. A relatively low per capita income should enable China to generate annual growth rates exceeding those of America and Europe and hence increase its share of global GDP. Its relative income share will therefore continue to increase. Meanwhile, India’s economic growth now exceeds China’s, which will also contribute to Emerging Asia’s growing share of the global pie, particularly as India weight increases over time.
In the short- to medium-term, this continued economic shift will – all other things equal – lead to more intense US-Chinese geopolitical competition. While China will continue to outgrow the US, the rate at which it will so will decline. To the extent that India is moderately aligned with the United States and has antagonistic relationship with China, it will make an ever greater contribution to maintaining the economic balance of power in Asia. India’s share of global income will continue to rise, first slow, then more rapidly. As Chinese growth will also continue to slow over the medium, all of this will likely translate into stable economic balance of power. Or put differently, the growth dynamics are not such that they will prove massively destabilizing, as they might do if US growth were to slow materially and China continued to grow 6% a year over the next fifty year.