China Has Already Overtaken the US

The US has already been overtaken by China and risks falling further behind. Considering the US economy is the world’s largest by nominal GDP, this may seem a controversial statement. But nominal GDP does not account for the different price levels between countries. When purchasing power is taken into account, China emerges as the world leader and the US debt pile is growing faster than its economy.

Meanwhile, most of this capital is going toward funding consumption, not the production of revenue generating exports, and despite heavy investments into technology, the US has fallen behind China in the race to develop the clean energy. This is important because electricity supply could be the key factor in determining which country leads in artificial intelligence.

US nominal GDP is certainly impressive, but in many ways it could simply reflect economic inefficiencies. For example, if the US spends $2m dollars to fabricate a cruise missile and China builds a similar missile for $400,000, China could build five times as many missiles while registering the same impact on nominal GDP.

This illustrates how both GDP data and military spending figures in US dollars can be misleading in determine the size of an economy or the effectiveness of a military power with China potentially being underestimated as a result.

Consider these incredible statistics. China’s share of global manufacturing is forecast to be four times more than the US by 2030 and compared with Trump’s America, China has double the power generation and three times higher car production, thirteen times more steel production, and more than two hundred times more shipbuilding capacity.

China produces 50% of the world's chemicals, ships, and steel, 70% of electric vehicles, 75% of the world's batteries, 80% of the world's consumer drones, and 90% of the world's solar panels and refined rare-earth elements. China exports more manufactured goods than the US, Germany, and Japan combined with China’s bonds trading at a lower yields than US Treasuries.  

Some analysts have focussed on the Chinese property sector as a catalyst for an economic collapse, but the government in Beijing has refused to bail out the sector and it could end up being the US that faces a debt crisis. JP Morgan CEO, Jamie Dimon, raised this concern in 2025, and years before the US debt pile hit $40 trillion in 2026, economist Nassim Taleb said we should expect this ‘white swan’ event.

In contrast to a black swan event which is unexpected, a white swan event is predictable and likely to occur. These pessimistic predictions are based on the fact that US debt continues to grow faster than GDP by purchasing power parity with debt servicing costs approach $1 trillion per annum, accounting for nearly 20% of total government expenditure.

A crisis of confidence in the US Treasury market, which has already been slowly unfolding due to declines in the value of long-dated US treasuries, has seen central banks around the world buying record volumes of gold. This trend could eventually lead to a convergence between nominal GDP and its PPP equivalents in emerging markets as their currencies strengthen against the dollar.

US Treasuries were supposed to be the linchpin of global finance due to the status of the yield on the 10-year US Treasury being regarded as the world’s ‘risk-free’ rate. However, since 2018, China’s bonds have been a better risk-free asset than US treasuries, posting a 30% higher return with lower volatility. Similarly, despite claims of a flagging economy, China’s real GDP by PPP is still increasing faster than the United States and India combined.

While China is well known for its manufacturing prowess, producing three times more than the US annually and surpassing the output of the next eight countries combined, the country is also a formidable force in advanced technology.

According to the Australian Strategic Policy Institute's Critical Technology Tracker, which examined 64 technologies in 2025, China leads in 53 of them, while the US leads in just 11. Even in those 11 sectors where the US maintains a lead, its advantage over China is often minimal, with China consistently ranking second.

China holds the lead across all sectors focusing on automated manufacturing and industrial processes as well as four out of six subsectors focussing on AI. This dominance in the AI realm is further corroborated by Stanford University's 2023 Artificial Intelligence Index, which reveals that China produces 40% of the world's peer-reviewed journal publications in AI, far surpassing the US at 10%.

Additionally, nine out of the top ten universities ranked by peer-reviewed journal publications are Chinese institutions. The only US school on the list is MIT in 10^th position.

US investment firm, Blackstone, is constructing a $25 billion AI data centre empire in the US to cater for future demand for the technology. But these data centres require an immense amount of electricity to operate due to the need for cooling infrastructure.

International Energy Agency projections suggest that global electricity demand from data centres will more than double by 2026 compared to 2022 levels. The increased electricity demand to power AI chips could range between 35 and 45 gigawatts over the next five years in the US, surpassing the current capacity of the grid and potentially causing brownouts in US cities.

In contrast, China is leading the charge in the shift towards green energy, installing plenty of new electricity supply to maintain its competitive edge in advancing cutting-edge technologies such as AI.

China currently boasts over 50% of the world's solar power capacity as well as 25% of all wind power. China also accounts for approximately 70% of all global manufacturing capacity for new energy products, including solar panels, wind turbines, and lithium-ion batteries.

A notable illustration of China’s prowess in manufacturing new technologies lies in the electric vehicle sector. China accounts for the majority of global EV sales with most components made locally.

This cost advantage facilitated a 57% increase in China's EV exports in 2023, totalling 1.7 million units, and saw China surpass Japan to become the world's largest car exporter for the first time. Prominent Chinese automaker, BYD, even acquired its own shipping vessel, the BYD Explorer No. 1, which embarked on its maiden voyage in January, carrying 5,000 cars.

With China more than doubling its solar capacity and increasing wind power capacity by 66% in 2023, analysts at the Centre for Research on Energy and Clean Air predicted that China could reach peak emissions in 2027, three years ahead of government targets, despite continued investment in coal power plants.

The latest data suggests China’s emissions peaked even sooner in 2024. China also leads in annual robot installations, granting its manufacturing sector a substantial competitive advantage even in the face of an aging population.

While the US still has a large consumer economy, with large energy, technology, and agricultural sectors and food production systems underlying the world’s largest consumer base, China is the bigger economy in real terms and already leads in most of the key technological domains central to the future of the global economy.  

The only real debate is the extent to which America’s per capita GDP makes the average American wealthier than the average Chinese citizen, but these statistics are complicated by the relative availability of affordable public services in the respective economies, wealth distribution and levels of home ownership.

The Chinese middle class are certainly better off than they have ever been while their American counterparts continue to grow poorer.