America Will Be the Dominant Power Before China in the Next Thirty Years. Here Is Why.

The only pitfall that could prevent this American domination is the political instability into which the country could fall.

In the merciless confrontation for world supremacy between America and China in the coming decades, the central parameter to consider is demography.

Everything starts with demography, I would even dare to say. The working-age population in the US will continue to grow by 0.5% per year from 2020 to 2050. It will decrease by 0.2% per year in the Eurozone, and by about 0.6% per year in China. Demographic aging will slow down their productivity.

As far as productivity per capita is concerned, the starting point is quite favorable in China (+3.5% per year in recent years). But it will slow down because of aging and because of Xi Jinping's economic policy strategy: the pre-eminence of the Chinese Communist Party and state-owned enterprises. In the Eurozone, hourly - not per capita - productivity has been stagnating since 2019.

Since the COVID-19 crisis, working hours per employee have been falling sharply, by more than 1% per year, probably as a result of an improvement in working conditions, particularly in sectors where they are arduous. This trend could continue.

Secondly, the balance of the property market will structurally deteriorate in China. Faced with the inadequacy of the pension system, China's future retirees have been saving heavily in the real estate sector, hence the oversized nature of this market (residential, commercial and infrastructure investment represents 30% of GDP). This implies that, when the aging process starts, between 2020 and 2030, Chinese savers will structurally become sellers of real estate, resulting in a decline in prices and a loss of wealth.

China's potential growth (sum of productivity gains and labor force growth) from the second half of the 2020s onwards will be no higher than 2%. In the eurozone, this potential growth will be zero at best.

The rise in energy prices on the Old Continent, first with the war in Ukraine, and then with the more rapid energy transition than in the rest of the world, is likely to lead to a loss of price competitiveness in the zone, and a new wave of deindustrialization, and hence a decline in productivity.

The contrast with the United States is striking: population growth (+0.5% per year for the working population), renewed productivity gains since the second half of the 2010s (productivity gains since then, beyond cyclical fluctuations, of the order of 2.2% per year). The country's potential growth can be expected to be 2.7% per year, compared with 2% in China and 0% in the eurozone.

In thirty years, the GDP of the United States will increase by 23% compared to that of China and will be multiplied by 2.22 compared to that of the eurozone. This is normal: R&D spending is much higher in the United States (3.2% of GDP) than in China (2.3% of GDP) and Europe (2% of GDP). Employment in new technologies reaches 4.2% of total employment in the United States and 3.1% in the eurozone.

The size effect of the United States - the American economy is becoming larger than the others - will also have a knock-on effect on growth.

Demographics and productivity gains will work in favor of the United States against China and, violently, against the eurozone. India and Africa will indeed grow even more than the United States, but with a significant development gap. There is no doubt that the United States will be the dominant power for the next thirty years, at least if it does not sink into political instability!

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