Observers love to talk about the similarities and differences between the two major powers, but one measure apparently has little importance.

China has a wealthy state and a poor society, while the U.S. government is poor and its citizens are wealthy write Christopher A. McNally and Denny Roy for The Diplomat. Some argue that the lack of private wealth in China makes the country less of a threat to the U.S. as the world’s number one economic power, but that analysis is mistaken.

Wealthy U.S. Society Gives No Advantage Over China

U.S. holds far more private wealth than China, but to what benefit?

While the Chinese state government can pay for huge infrastructure projects such as high-speed railways and the “New Silk Road,” the U.S. struggles to raise funds for public works. However U.S. citizens have a considerably higher quality of life than the average Chinese, and U.S. citizens hold around $85 trillion in private wealth compared to China’s $20 trillion.

McNally and Roy debunk claims that this private wealth gap means that China will not threaten America’s global hegemony in the near future. They call the idea that the U.S. maintains a huge advantage over China “somewhat ephemeral” given the fact that most of it is made up of paper wealth reliant on the current value of stocks and bonds.

The speed with which paper wealth can disappear has been demonstrated all too recently, and this form of unstable wealth is far more popular in the U.S. than China. More than 50% of U.S. households own stocks compared to less than 10% of Chinese.

Competitive advantage could be wiped out

After the U.S. printed large amounts of currency during the last financial crisis, stock prices inflated and the value of U.S. homes also increased slightly. The Chinese decided to use an economic stimulus program using debt financing to build infrastructure projects that have a tangible effect on productivity.

Assessments of U.S. private wealth are also boosted because America supplies the majority of the world’s reserve currency, but that could change. The status of the dollar has aleady been called into question, and alternatives such as the Chinese yuan have been proposed.

If that were to occur U.S. international purchasing power would be significantly reduced, and China’s would increase. Appreciation of the Japanese yen during the 1980’s offers a clear precedent for a rapid decrease in wealth gap.

Private wealth has little bearing on global leadership

For global leadership there are two important factors: technological innovation and strategic leverage through the projection of military power. In these two areas the private wealth gap has little to no bearing.

China is catching up to the U.S. in terms of technological progress, and the gap is set to close even further due to a large number of Chinese scientists working in the U.S. on STEM research (science, technology, engineering and mathematics). China has demonstrated an ability to oversee rapid progress in research and development, as is evidenced by their rapidly evolving military technology sector.

If international politics is tantamount to a competition among states, then the private wealth held by citizens is of no real bearing. Citizens cannot convert their private wealth into instruments of national power, and this wealth is easy to lose. Rich families can easily take their wealth out of their home country, and high levels of consumer consumption mean little if national government has no money for infrastructure or research.

U.S. should not get complacent in face of growing Chinese competition

On the other hand a government that invests heavily in military strength can hold a great deal of global influence. If the smaller competitor has a coherent plan then the competitive advantage of a larger, floundering competitor can be mitigated. Another advantage that China holds is the fact that its system of government allows the state to wield its power with little accountability to its population, whereas elected officials in the U.S. can be thrown out of office by a restive population.

Although China holds a significant advantage on paper, its nation-building program is often given exaggerated praise for its coherence and efficiency. There are many challenges facing Beijing, not least economic, political and social, and the foreign policy of the Xi Jinping government has done little to mitigate these problems.

At the same time as recognizing China’s limitations, American strategists should acknowledge the fact that consumer consumption and private wealth cannot be expected to act as a guarantee of U.S. security or superpower status. They say that the most difficult thing is to keep improving when you’re at the top, but it seems that U.S. strategists have given up on maintaining a competitive advantage over China.