Chinese public debt is not easy to evaluate, beyond the fact that it has grown very rapidly. In 2000, most debt took the form of bank loans, but non-bank finance, known as shadow lending, has since expanded. State-owned enterprises and local governments receive disproportionate credit, though obviously not all. Less important until recently was the central government's fiscal debt.
The Chinese government owns all rural and some urban land, though the value of the land is far lower than its equivalent in the United States, due to land quality and resource depletion. The Chinese state also owns trillions in assets through state-owned enterprises. Combined, gross assets were reportedly worth more than $14 trillion in 2011, and also had been growing. Assets net of debt exceeded $6 trillion in 2013.
Using official data on debt and a very round estimate for public assets in 2000, China's total wealth measured above $7 trillion in 2000, $19 trillion in 2007, and near $28 trillion in mid-2014.
While mixing in the public sector definitely reduces the precision of the estimates, it does take them in the right direction. The gap between the full American and Chinese economies has never been as large as the private sector taken alone indicates.
The revised numbers show China climbing from almost 18 percent of American wealth in 2000 to over 32 percent in 2007 - a truly impressive gain in only seven years. By mid-2014 the figure stood at 39 percent, showing gains that are much slower, but gains nevertheless.
The argument that the United States is pulling away therefore rests on the absolute gap, which rose from $34 trillion, to $40 trillion, to $44 trillion by mid-2014. Here China is not catching up, but rather falling behind at a slower pace. This has enormous practical implications, with the United States still adding trillions more to its national wealth than is China; additional wealth that enables greater economic prosperity, military spending, and global leadership.
Considering GDP in this light actually makes the claim sharper. Which is preferable for policymakers and ordinary people: catching up in the value of economic transactions per year, or having several trillion dollars in additional national wealth? The former is a fairly good sign for economic development, but the latter is the true goal.
The stock market boom in China will accelerate private wealth gains. On the other hand, U.S. debt accumulation is now slower than China's. Looking further down the road, China's economy is plainly slowing (by any measure), while the U.S. outlook is uncertain. The absolute wealth gap rose despite very rapid Chinese expansion from 2000 to 2007. It is $10 trillion larger than it was in 2000. China has done surprising things, but closing this gap with the United States by more than $10 trillion would be one of the most surprising.
There are certainly economic measurements on which China is catching or has caught the United States. But on arguably the most important one, total national wealth, China does not look to be catching up and does not seem to have much prospect of doing so.