Is America Handing China the Crown?

The most consequential threat to American economic dominance may not be coming from Beijing. It may be coming from Washington.

That's the argument from Li Cheng, founding director of the University of Hong Kong's Centre on Contemporary China and the World, who says China remains on track to overtake the United States as the world's largest economy within the next 10 years — not because China is surging ahead, but because the US is pursuing a string of what he calls "self-defeating" policies that are accelerating the shift.

It's a provocative claim. But it arrives at a moment when the evidence is harder to dismiss than usual.

What Li Cheng Is Actually Arguing

Li's thesis isn't that China's economy is thriving — he's candid that it isn't. The property market remains depressed, youth unemployment has been stubbornly high, and domestic consumption has yet to fully recover. China is in the middle of a painful structural transition, moving away from debt-fueled infrastructure investment toward a technology and services-driven model.

But Li's comparison isn't China versus an idealized America. It's China's current challenges versus America's current trajectory. And on that measure, he argues, the US picture looks worse.

The policies he points to are not hypothetical. Sweeping tariffs that are straining relationships with trading partners. Diplomatic friction with longtime allies over defense burden-sharing. Deep cuts to federal research and science budgets. Tightening immigration rules that historically fed America's universities and tech sector with global talent. Taken individually, each might be defensible. Taken together, Li suggests, they represent a systematic erosion of the structural advantages that made the US economy dominant in the first place.

The numbers offer some context. By purchasing power parity (PPP), China already surpassed the US back in 2016. In nominal GDP terms — the more commonly cited measure — China now sits at roughly 65–70% of US output. The gap has been closing for decades. What Li is arguing is that American policy choices are now closing it faster.

Why This Moment Matters

Sponsored

Advertise with Us

[email protected]

Sponsored

The timing of this debate is not incidental. It's happening as the US simultaneously imposes broad tariff regimes, signals reduced commitment to multilateral institutions, and scales back the foreign policy engagement that underwrote the post-WWII liberal economic order. Meanwhile, China has been quietly deepening its trade architecture through RCEP — the Regional Comprehensive Economic Partnership — binding together an Asian economic bloc that accounts for roughly 30% of global GDP.

For global investors, the question isn't academic. Currency exposure, supply chain positioning, and long-term capital allocation all hinge on assumptions about which economic pole will be more gravitationally powerful in 2035. Multinationals that spent the last decade diversifying away from China are now watching US policy volatility with equal unease. There's no obvious safe harbor.

For policymakers in mid-sized economies — South Korea, Japan, Australia, the Gulf states — the dilemma is acute. These countries have security relationships anchored to Washington and economic relationships increasingly anchored to Beijing. Every escalation in US-China tension forces a harder choice between the two.

The Case Against Li's Thesis

Not everyone finds the argument persuasive, and the counterarguments deserve serious weight.

The US dollar remains the world's reserve currency, and that status confers enormous structural advantages that don't erode quickly. American capital markets are deeper, more liquid, and more trusted than any alternative. Silicon Valley's innovation ecosystem — the venture culture, the research universities, the density of technical talent — isn't something that can be replicated by policy decree.

China's own structural headwinds are also significant. Its population is shrinking and aging faster than most projections anticipated. The working-age population has already peaked. Property sector debt remains a systemic risk. And questions about the reliability of Chinese economic data — a persistent concern among Western economists — make confident forecasting genuinely difficult.

There's also a geopolitical dimension Li's framing may underweight. Economic size and geopolitical power are related, but not identical. The US alliance network — even if currently strained — represents a form of strategic capital that China simply doesn't possess. NATO, bilateral security treaties across the Pacific, and shared intelligence relationships create a web of interdependence that pure GDP comparisons don't capture.

The View From the Rest of the World

Perhaps the most revealing perspective comes from neither Washington nor Beijing, but from the countries being asked to choose between them.

Across the Global South, the dominant strategy is hedging. Countries in Southeast Asia, Africa, and Latin America are accepting Belt and Road infrastructure investment from China while maintaining security ties with the US. They're not ideologically committed to either vision of world order — they're making pragmatic calculations about who delivers tangible benefits. That transactional logic is itself a signal: the era of automatic alignment with American-led institutions is over, regardless of whether China formally surpasses the US in GDP.

Europe presents a different calculation. Frustrated by American unilateralism, European leaders have accelerated talk of "strategic autonomy" — but they're not rushing toward a China-centric order either. The EU's simultaneous pursuit of trade diversification away from China and security distance from the US suggests a world that may not be bipolar at all, but genuinely multipolar in ways that make clean predictions about a single "Number One" economy somewhat beside the point.