A few years ago, some regarded Japan as having overtaken the U.S. Europe also was supposedly vying for global economic dominance. Now any such claims would seem preposterous. In both cases, the credit system got out of control, with too much lending to the private sector in 1980s Japan and excessive government borrowing during the 2000s in the eurozone.
Similarly, it remains unclear that the Chinese development path will remain smooth. Fixed investment in China is close to 50 percent of GDP, which must be a world record. Credit to state firms and to households continues to grow rapidly. Isn't this a version of exactly what derailed Japanese growth?
On the key issue of being able to issue a "reserve currency" that investors and governments want to hold, Subramanian is correct that China has many of the prerequisites in place. But it still lacks some key elements, including fully fledged property rights. If you worry about getting your money out of a country when times turn tough, China is not an attractive place to hold your reserves.
External challenges do sometimes bring down states. But, more frequently, the big problems are internal: The regime cannot deliver growth, its legitimacy fades, and people start to head for the exits (or at least get their money out).
If the U.S. is eclipsed any time soon, this will more likely be because of its loss of social cohesion and its dysfunctional politics. China might well step in to fill that vacuum, but that is quite different from being able to elbow America aside.
Read this piece at Project Syndicate.