Measuring What Matters: Why GDP Is Not Geopolitical Destiny

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The rise of China and the security dilemma that it presents is viewed as inevitable by significant sections of the UK policy community. Central to this is China's strong economic base, which has generated the diplomatic, informational, military and economic levers necessary for it to challenge the US-led 'rules-based' order designed to perpetuate Western power post-World War Two. However, while China is a formidable adversary and should not be underestimated, we should not be blind to the weaknesses in China's economic structure and risk overestimating its strengths and constraining ourselves conceptually. In particular, we should be cautious in using gross indicators to calculate relative power and economic growth, as in isolation these approaches can be misleading. This article compares competing methods of measuring power, before examining that while China is likely to overtake the US in terms of gross real GDP, this is not an effective metric for assessing relative power when used in isolation. Despite economic headwinds, China will still overtake the US in terms of real GDP Gross Domestic Product (GDP) is the market value of all "final goods and services produced in a specific period" in a country. Real GDP accounts for price inflation against the GDP of a chosen base year, therefore only rising output increases GDP, not inflation. This metric of real GDP benefits from being the most commonly used indicator of an economy's overall size, growth and general health, meaning that there is significantly more data available for comparative analysis. Although China has significant demographic, capital and productivity challenges, this is unlikely to prevent China from overtaking the US in real GDP. China has capitalised upon lower relative wage costs due to its large population, a central driver of its economic growth over the last 50 years. The 1978 economic reforms permitted private businesses while liberalising foreign trade and investment, since which China has experienced enormous economic growth, even compared to other rapidly growing "Asian Tiger" economies. From 1978 to the onset of the 2008 global financial crisis, China's real GDP grew by a factor of 17. The 2008 crisis reduced this breakneck growth, with China's annual real GDP growth between 2015 and 2018 falling below 7% for the first time since 1991. This was compounded by further shocks from the recent Covid pandemic and the CCP's "zero Covid" policy. Chinese policy post-2008 has increasingly relied upon state investment, improving technology and expanding domestic consumption of finished products. This transition from the previous export economic focus is assessed to be "hedging" against reduced exports due to increasing competition and international pressures such as tariffs. Nonetheless, China's real GDP should still increase 5.7% annually to 2025 and 4.7% annually until 2030, according to Centre for Economics and Business Research (CEBR) forecasts. Although there are reasons to doubt these figures - including the provision of misleading data by the Chinese state, and upcoming shocks such as increased nearshoring of supply chains and property market debt bubbles - the overall trend is clear. Chinese real GDP is on course to overtake the US by 2030. How can power be measured between states? There are three main approaches to measuring power in international relations; control over actors, control over outcomes and control over resources. In the case of control over actors, power is usually defined as an actor's ability to shape world politics following its interests. However, Nye argues that it is impossible to measure this ability systematically because it would require a comprehensive understanding of each actor's influence and interest over a potentially infinite number of events. This means that the power over outcomes approach is issue-specific, with analysis not often transferable to other situations. Therefore, it is only useful for retrospective analy...