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The Xi Surge: China's economy booms to 70% of US

9 years into his leadership, nation's GDP expands 70%

A screen at a Beijing shopping mall shows Chinese President Xi Jinping addressing world leaders at the Group of 20 summit in Rome on Oct. 31.   © Reuters

BEIJING -- Since Chinese President Xi Jinping took the helm of the nation nearly nine years ago as the Communist Party's leader, its economy has vaulted from half of America's size to 70% or so -- a gap that will continue to narrow, with some estimates saying it could surpass the U.S. within the decade.

China's gross domestic product has grown roughly 70% since 2012 in nominal dollars. Consumption was a key force behind the country's economic rise under Xi, with disposable income doubling per capita since 2012. Total retail sales of social consumer goods, which include both physical and online sales, came to 31.8 trillion yuan ($4.97 trillion) for the January-September period -- up 110% from the same nine months of 2012.

National fixed-asset investment, or investment in public works, factories and other facilities, increased 55%. For the January-October period, exports increased more than 60% and imports by almost 50% compared with the same 10 months of 2012.

Xi has been especially focused on lifting low-income households to end absolute poverty and achieve a "moderately prosperous society." Urban residents now have 160% more disposable income than rural residents, down from 190% in 2012.

But even as China cements its new position, persistent inequality and mounting debts cast twin shadows as Xi lays the groundwork for an extraordinary third term as party leader at this week's Central Committee plenum.

The decrease in the gap between urban and rural pay stems partly from statistical quirks. "What rural migrant workers earn in the city is counted toward rural income, which helps narrow the gap," a researcher at MUFG Bank (China) said.

The country's Gini coefficient -- a measure of inequality that ranges from a minimum of 0 to a maximum of 1 -- had fallen to 0.462 as of 2015. But it has since remained largely flat and exceeds the 2018 average of 0.31 or so for the Organization for Economic Cooperation and Development.

Inequality is an issue within cities as well. Condominiums in the biggest cities now cost dozens of times what many people earn in a year. While residents born in these locations can inherit property from their parents, keeping living expenses down, younger newcomers from smaller cities can work their whole lives and still be unable to buy a home.

A shortage of good jobs threatens to exacerbate urban inequality. Though China began reopening its economy from the coronavirus ahead of other major countries, the number of new urban jobs remains below pre-pandemic levels.

Chinese President Xi Jinping, right, shakes hands with then-U.S. President Barack Obama at a Paris climate summit in 2015. Now nearly nine years in power, Xi aims to secure a rare third term as the ruling Communist Party's general secretary at its twice-a-decade congress next fall.   © Reuters

About 200 million Chinese work in the gig economy, picking up odd jobs like deliveries online, the government estimates. But the lack of stability and harsh working conditions associated with gig work have sparked much controversy.

Mounting debt -- highlighted by the crisis at property developer Evergrande Group -- also poses major economic risks. Private-sector liabilities, excluding in the financial sector, increased about 160% from the October-December quarter of 2012 to $35.68 trillion for the January-March quarter of 2021, according to the Bank for International Settlements.

With debt growing faster than the economy, private liabilities are now equivalent to 2.2 times GDP -- more than Japan's record from immediately after its asset price bubble burst.

At a key economic and financial meeting in August, Xi and other Communist Party leaders discussed ways to advance "common prosperity" and resolve major financial risks. They are expected to ramp up efforts to address inequality and debt -- two key issues that have clouded China's economic rise.

Meanwhile, China has also become a global military power on Xi's watch. Its defense budget has roughly doubled since 2012 to more than 1.35 trillion yuan for 2021. Its arsenal of medium- and intermediate-range missiles, which Beijing considers a key deterrent against U.S. military action, had expanded about 70% to 216 as of 2020.

China commissioned its first aircraft carrier, a remodeled ex-Soviet vessel renamed the Liaoning, shortly before Xi became party leader. This was followed by its first homegrown carrier, the Shandong. Both vessels run on conventional nonnuclear fuel and require aircraft to take off unassisted instead of using catapults, putting China at a significant disadvantage against American forces at this point.

But China is already constructing a third carrier and is believed to either be building or planning one or two more new vessels. An expanded fleet is expected to significantly bolster the nation's ability to respond to contingencies in nearby waters, including in the East and South China seas and the Taiwan Strait.

The country had also increased its fleet of military aircraft, including fighters, bombers and patrol aircraft, by about 50% to 3,020 between 2012 and 2020. Modern fighters nearly doubled to 1,080.

"We will elevate our people's armed forces to world-class standards," Xi said in a speech for the Communist Party's 100th anniversary on July 1. Chinese military spending is only expected to increase amid growing tensions with the U.S. over Taiwan and the South China Sea.

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