After the United States experienced nearly 80 years of near-peace from its rise to its peak, China, the second largest economy, is likely to become the next new world order. The International Monetary Fund (IMF) predicts in its latest World Economic Outlook that the U.S. economic growth will further decline from 2.1% in 2024 to 1.7% in 2025.
Surprisingly, China is also expected to decline to 4.1% from 4.6%. By then, China’s growth rate will likely be even lower, as the real estate crash does not appear to have happened yet.
According to The Big Cycle demonstrated by Ray Dalio in his book “Principles for Dealing with the Changing World Order”, the Chinese economy is currently in the early phase of the Big Cycle: The Rise (refers below graphic). Although Chinese government officials have reiterated that China will perform better this year, the Chinese economy is currently facing severe internal disorder. Rising youth unemployment and deflationary pressures pose challenges to China’s path to reach The Top in the Big Cycle. This points to something fundamentally wrong with China’s economy, which has led to the political instability and public outcry over the past few months.
This intuition reveals that China may take longer than expected to change the world order. Although the United States is currently in a stage of The Decline, it can still maintain what has always been the existing world order by enhancing further resource allocation, income growth, and culture.
As Ray Dalio writes, existing world order often ends with war. In the modern era of civilization, the war between the United States and China seems to have already taken place, in the form of trade tensions, which are likely to intensify if Trump comes to power again. The concern is that if the United States and China insist on pursuing more wealth and world power, can both economies sustain further economic losses in 2024?
