Appreciation of Xu Yili's comments

Xu Yili: What does China take to surpass the United States?

The report of Chinese Academy of Sciences "China will become the first economy in 20 19 and surpass the United States in 2049" has once again become the focus of recent public opinion disputes. What does China take to surpass the United States? Is this nonsense, or is it a future that can be touched in one jump?

In terms of GDP alone, it is certain that China will surpass the United States economically. This is by no means what the Chinese Academy of Sciences said. As early as last August, the Financial Times put forward a very similar view that China will surpass the United States to become the world's number one economy in 20 17.

Even more incredible is that the United States is not worried about China's economic catch-up. On the contrary, the fact is that European and American countries have always been the biggest beneficiaries of China's rapid rise-they are enjoying the process. They are happy to see the rise of China, because they also share the huge dividends brought by the rise of China, among which the United States is the most representative. As long as the world economy can't get rid of the shackles of dollar pricing, China will stay in the position of "working for the United States" for one day. In another case, China's products made of real money are exported to the United States in exchange for a large number of beautifully printed "waste paper". From this perspective, it is not important whether China can surpass the United States economically. The advantage in GDP is meaningless.

The crux of the matter is that there are many examples in history in which other countries surpassed the hegemon at that time in GDP, but did they eventually become the new hegemon? There are successes and failures. There is a great contrast between China's surpassing the United States and Britain's surpassing 100 years ago. So how did the United States successfully kick Britain out of the world economic hegemony?

Usually, we think that the American economy has surpassed Britain and reached the key point of becoming the economic hegemon and even the US dollar becoming the world currency. But the opposite is true. As early as the middle of19th century, the industrial output value of the United States surpassed that of Britain. However, it is obvious that Britain will remain the direction of the global economy in the next 100 years. It was not until the end of World War II that the United States completely became the new world leader. Why did it last nearly 100 years? It is very important that although the United States surpassed Britain economically in the early days, Britain has been reluctant to give in because of the position of the pound. It was not until after World War II that the dollar replaced the pound that the United States became the real hegemon.

Why is the pound willing to give way to the dollar? It was the two world wars that gave America a long-awaited opportunity. Years of wars and war costs led to a large outflow of British gold reserves at that time, giving the dollar a chance to rise. With the rapid establishment of the Bretton Woods system based on gold, the opportunity of dollar hegemony was born. Since then, the United States has forced Britain to resume the free convertibility of the pound against the dollar through $3.7 billion in economic aid, which is almost twice the total amount of American aid to Europe. With the British government's compromise, the pound faced a large-scale sell-off and the dollar became hot. Within a few months, more than one billion gold flowed out of Britain. The pound has been powerless since then.

The United States defeated Britain, showing the cruelty of so-called economic hegemony, and such wars, especially after the United States achieved world hegemony, became more frequent and comfortable.

In the decades when the United States became the hegemon, in fact, the hegemonic position of the United States was also impacted by many other countries. In the 1980s, there were many voices in the world that Japan surpassed the United States, and Japan even claimed to have replaced the United States as the world's largest economic power. In the 1990s, the rise of the euro zone also flaunted its tough attitude towards the United States, which regarded the euro countries as strong rivals.

But after less than ten years, these dreams of the past became jokes. From 65438 to 0985, the United States and four other countries signed the Plaza Agreement, intervened in the foreign exchange market, and the strong dollar made a soft landing. After that, the yen appreciated continuously for 20 years. With an appreciation of nearly 70%, a large amount of capital flowed into Japan. On the one hand, the influx of funds hindered the export of manufacturing industry, on the other hand, it also ignited Japan's bubble economy. Until around 1995, the United States stopped intervening in the exchange rate of the US dollar, and the Japanese economy fell from the peak to the bottom. The rhetoric of reviving and surpassing America or even "buying America" has become a dream.

In contrast, the United States has dealt with the euro zone more rudely. Soros successfully attacked the pound to join the euro zone, and the rumor was supported by the United States. Recently, the three major rating agencies controlled by Wall Street directly detonated Greece's debt rating. Since then, the euro zone has fallen into civil strife, and the so-called two-point world has finally been overthrown in the smoke of European debt.

It can be seen that China is not the first country to claim to surpass the United States, and Japanese and European countries have also failed. But why did the United States succeed in achieving hegemony when its GDP surpassed that of Britain, while Japan and the euro countries failed?

This was supported by historical conditions at that time. When the United States overtook Britain, there appeared two conditions that are difficult to meet now: 1. At that time, at the end of two world wars, the dollar became the world currency. 2. Among the currencies at that time, gold was recognized as legal tender.

These two historical conditions are difficult to form now: 1, modern weapons are updated, many countries have nuclear weapons, and no one dares to launch a world-wide war easily. Some of them are just performances for the domestic people. Gold should be the most important reserve currency, but its importance has been weakened by the rulers of various countries. Rulers all over the world are most afraid of the return of the gold standard. Without the gold standard, currencies of all countries can become currencies based on national credit, and they can issue as many as they want. I don't know how much the loss of the gold standard is to the people of the world, but this naked robbery-style currency issuance has been boasted by the rulers as a good economic system.

Admittedly, the lack of these two conditions doomed China to encounter greater resistance in the process of surpassing the United States than when the United States surpassed Britain at that time.

China has experienced 30 years of high growth, and the potential investment space is constantly telling the great potential of China's economy to take off again. But the surpassing of GDP can't bring more practical benefits to China. Even if he is as rich as an enemy, he is still just a wage earner-this is China's embarrassment. And once China, a wage earner, wants to fire the American boss and start his own business, he is likely to face a full-scale attack of dollar weapons.

China's economy is not monolithic. Judging from the most intuitive GDP energy consumption, last year's extensive growth laid a hidden danger for China's economy. For a long time, China's energy consumption per unit GDP has been kept at 3-4 times of the international level. China's 30-year rapid rise is not without cost. In the past 30 years, China consumed 46% of steel, 16% of energy and 52% of cement produced in the same period, but only created less than 8% of the global GDP. Under the background of economic growth, it not only means that the sustainability of economic growth will be challenged, but more directly, under the overheated investment, high inflation and high debt hidden dangers will break through the financial war brewing in the future.

From this perspective, it is very naive to be immersed in the psychedelic of "surpassing Britain and catching up with the United States". China needs to put aside its jubilant national roots and turn to deeper thinking-China needs not only the glory of GDP, but also the right to speak in the world economy.

Without this right to speak, China will only become a manufacturing tool of the United States, and we are still complacent about the high GDP in the manufacturing process. China lacks its own ability of knowledge innovation and technological innovation. Under the background of technology monopoly in Europe and America, China, which has benefited from the rapid development of manufacturing migration, has become a cheap factory in Europe and America. China's resilience in the subprime mortgage crisis in 2008 contributed a lot to the profits of American overseas enterprises of 956 billion US dollars, while the profits of its domestic enterprises were only 532 billion US dollars, and the profits of overseas enterprises were 1.8 times that of domestic enterprises. It is more obvious from the data that for every dollar spent on products made in China, 55 dollars are diverted to jobs in the United States. The United States is not only squeezing the fruits of China's rise, but also taking advantage of China to further develop high technology and make room for manufacturing.

Obviously, if China wants to have the right to speak in the world economy, it needs to change the image of the world factory first. China needs to keep the benefits of more GDP growth at home. If these ideas are to be realized, the internationalization of RMB is the most crucial step. Even if RMB can't replace the dollar as the world currency for the time being, we should shout in the international market to reform the international monetary and financial system and even create a new world currency. In the past few years, we have shouted out the proposal of expanding SDR issuance as a transition.

But the road ahead is long and dangerous everywhere. Looking back at the price paid by Japan, the euro and even the pound against the US dollar in the past, China should realize that there is nothing to be happy about, and this is only the first step of the long March.