The New Phase of World War III. China Loses, the USA Gains

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Our considerations regarding the current situation in the ongoing conflict—already referred to by many analysts as „World War III”—should begin with an assessment of the present state of the two main actors in this confrontation: the USA and China. I have already mentioned the Americans in my previous two articles, primarily in the context of their strategic initiative. However, it is now necessary to compare their potential with that of China, as this will determine the directions of this confrontation’s resolution and help better understand both American actions and the current behavior of the Russian authorities.

I should note that my observations about China are not merely derived from various analytical reports. I have visited China multiple times over the past years, and this firsthand experience allows me to assess their situation quite accurately. I mention this because, for years, I have followed with amusement the highly popular „analyses” and „studies” in Poland and beyond, which suggested that by 2025 or 2026, China would surpass the USA and become the world’s leading superpower. Following this, China was expected to leverage its economic dominance to swiftly overtake the USA militarily, utilizing its growing technological advantage. In other words, by around 2030, Pax Americana was to be replaced by Pax Sinica.

Reading these absurd predictions and comparing them to China’s reality „from the inside,” I was well aware of their worth. I have expressed this opinion in my writings many times (which can be verified), though few seemed interested.

Today, the fact that the USA is „pulling away” from China is indisputable. A tragic indicator of this for China is the widening GDP gap between the two countries. After reaching a historic peak—where China’s GDP equaled 71% of the USA’s—it dropped to 64% last year. It should be noted that this comparison is based on official data. However, even last year, while China’s official statistics reported GDP growth of 4.8% (one of the worst performances since the late 1970s), serious analyses suggest a maximum growth of only 2.8%. In China’s circumstances, this is a true catastrophe.

The foundation of China’s „great leap” (not the one orchestrated by Mao) was economic expansion. For three decades, this model worked, but its time has ended. I won’t elaborate on the many reasons behind this, as space is limited. Instead, I will focus on a few key factors that have led to stagnation—or rather, an actual recession in the Chinese economy.

1. 1. China is now a victim of its own one-child policy. This has become a major barrier both for domestic consumption and for sustaining industrial and service sector growth. Symbolically, last year, China was overtaken by India in population size (by over 30 million people), and even the official Chinese population figure (1.419 billion) is widely considered to be significantly overestimated.
   2. Social problems are escalating rapidly. China’s already weak pension system is on the verge of collapse due to its inverted demographic structure, and there is no coherent solution to escape this tightening noose.
   3. The construction sector has completely collapsed. This industry, responsible for around 25% of GDP, has stalled. Additionally, other infrastructure projects—such as high-speed rail and highways—have lost momentum, as so much has already been built that there are few places left to expand.
   4. China’s economy is being crippled by deflation and ongoing currency manipulations. While this allows the Communist Party to claim it is meeting its economic targets, it undermines the country’s ability to tackle international challenges. It also distorts the true value of international trade, which has been the backbone of China’s economic growth for decades.
   5. Foreign investment in China is rapidly declining. To illustrate:
      • 2022: $180 billion
      • 2023: $15 billion
      • Meanwhile, in 2024, capital outflows from China reached approximately $250 billion.

Some of China’s economic struggles resemble the crises Japan and South Korea faced in similar phases of their economic „great leaps.” However, neither of these countries dealt with the sheer volume of problems and challenges that China is currently facing. Moreover, China’s political and institutional system does not—and will not—facilitate overcoming these difficulties.

In contrast, over the past three years, the US economy—despite the unimpressive results of the Biden administration’s policies—has proven to be far more efficient and dynamic. It now seems that the investment push in high technology initiated by Trump will strip China of its illusory advantages. The sheer scale of American investment in this sector guarantees that the USA will dominate it completely. A similar mechanism is at play in defense spending—roughly $900 billion per year in the US compared to $150 billion in China (its highest-ever level). Clearly, this not only maintains American superiority but is also rapidly expanding it.