China overtook Germany to become the world’s third largest economy in 2007 and three years later reached another milestone by overtaking Japan as the second largest economy in the world. Since then China was predicted to overtake the US as the world’s largest economy powerhouse around 2025 or 2030 the latest. Judging from how the China’s economy is growing there’s no doubt that it’s a matter of time before the country would achieve such an awesome milestone.
But if the latest data posted on World Economy Outlook by International Monetary Fund (IMF) is reliable, the date of China becoming the new economic leader could be sooner than that – 2016. According to the figures, the Chinese economy would grow from $11.2 trillion in 2011 to $19 trillion in 2016. Over the same period, the U.S. economy will rise but at a slower pace from a dominant $15.2 trillion (2011) to a mere $18.8 trillion (2016). Hence China is set to be officially announced as the world’s dominant economic power starting the year 2016.
There would surely be continuous debates when that year arrives, if indeed the above prediction is correct. Analysts may argue that economic power should be measured by purchasing power parity (PPP) which means what your money can buy on the street. It should be measured by converting the national currency (in this case Chinese yuan or renminbi) into the U.S. dollar and measuring how much is flowing through the economy, the same way “Big Mac” index was used.
Interestingly IMF also projects U.S. GDP (in dollars, of course) will be $15.2 trillion in 2011 rising to $18.8 trillion in 2016; while China’s will be $6.5 trillion this year and almost doubled to $11.2 trillion by 2016. Under such yardstick U.S. will still be the largest economic powerhouse by 2016 (*phew*). In addition, if analysts were to measure per capita income as a proportion of GDP, the U.S. will still leads ahead of China. Even at IMF’s preferable measurement of GDP market rates, U.S., which is 130% bigger than China now will still be 70% larger by 2016.
IMF considers that GDP in purchase-power-parity (PPP) terms is not the most appropriate measure for comparing the relative size of countries to the global economy simply because PPP price levels are influenced by non-traded services, which are more relevant domestically than globally. But analysts argue that PPP is the closest you can get because it measures the output of economies in terms of real goods and services.
China has been the fastest growing economy in the world for almost three decades and in the process consumes more than a third of the world’s aluminum output, a quarter of its copper production, a tenth of its oil and accounts for more than half of the trading in iron ore. On another note, China is also the largest producer of food and agricultural products, seafood, cotton commodities, pork, textile and electronic products.
Nevertheless one has to remember that China still has a secret weapon – the deeply undervalued renminbi. Revalue the renminbi could shift the GDP figures drastically. Still, beyond 2012 the next U.S. President may not be so gentle with China, if President Obama were to lose the election to some crazy guys such as Donald Trump. Speculated to challenge Obama, Trump blasted Obama’s China policy in allowing China to succeed and prosper because apparently China is going to destroy America in the process.
What was in silly Donald Trump’s mind? Does he plans to invade China if the country continues to grow and overtakes U.S. while maintaining an artificial undervalue renminbi? Trump should be made to realize that China still has an estimated US$3 trillion in U.S. treasuries which it could dump it in the open market to create financial chaos. Can the U.S. outgrow the Chinese instead by cutting corporate tax from the top 35% to 25% or even lower?
Sure, the U.S. had confronted more-hostile enemies before namely the Nazi Germany and the Soviet Union but it had never had to contend with a rival that matched it in economic strength. Maybe a China economic bubble burst would do U.S. a favor by pulling the Chinese further away from matching the U.S. Maybe the Chinese would be happy to just suppress its currency further so that the U.S. can maintain it’s number one position (and to make U.S. happy in the process).
Other Articles That May Interest You …
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- Wake-up, Prepare Your Kids for China
- 6 Mind-boggling Info about China That May Interest You
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April 28th, 2011 by financetwitter
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Comments
In reply…
Back to the Future by Copying China’s Economic ‘Blueprint’- The only Solution for the West’s Future Socio-economic Existence of any real merit
When China set out in earnest to dominate world trade some 30 years ago, it did not ask its politicians to determine the nation’s economic ‘blueprint’, but its engineers and specifically His Excellency Jian Song, former vice-premier of China for 13-years and an Honorary Member of our Foundation.
This is a little known fact in the West as Song is the true ‘master’ of the basis of China’s economic dynamism today. There were five broad-brush critical phases within this world-leading strategy thought out by Song and his eminent colleagues under his control.
1. Human Capacity Building and Technical Educational Development – low cost/high human value Strategy
2. National Economic Stimulation and Internal Market Development – Mass Internal trade growth and National Savings Strategy
3. Strategy for Global Manufacturing Dominance, Global Minerals Supply and National Innovation Strategy
4. Strategy for the Acquisition of Global Assets
5. Enabling Strategy to Control World Markets
Under Song’s guidance China started the long applied process to dominate world economics over his 13-year tenure as vice-premier.
Considering these facts, the West if it is to recapture the high ground in the economic stakes has to supplant its political thinking with innovative thinking likewise from its engineers, scientists and overridingly its independent innovators (the capture of the people’s creative ideas). There is no doubt that China’s economic emergence over the last quarter of a century has been unparalleled and has proved to be a truly enviable success by any standards. It will be even more phenomenal in the future as its global dominance will eventually encompass at least half the world’s economic turnover, equivalent to more than what the USA ever attained by a factor nearly greater than 3.
Therefore the West on its present path is in for a life-changing experience over the next three decades that will despatch the majority of our future generations to a life of relative poverty with the East. This is not pie in the sky but thinking based upon reality and fact.
Consequently our politicians in the West have to start anew with their economic thinking and do what China decided to do around four decades ago, create their economic dynamism, not based upon political ideology, but based upon re-engineered creative thinking of their innovative inventors and engineers. That is the only way that the West can ever have a hope of re-engaging substantially in the future of world of economics on a supportable and totally sustainable basis. For all other thinking will fail us to our great regret and with colossal human misery for many centuries to come it has to be said. Yes, we are certainly dealing with centuries here, for once the high ground has predominantly been taken up by SE Asia and China’s unassailable economic lead, the West will find it near impossible to retake any of the world markets back. That is how bad it will get and we have better get used to it due to our western political thinking on the economic front.
Dr David Hill
Executive Director
World Innovation Foundation
Ps. part of the masterplan was to undermine the US dollar with its replacement with a new world currency. Something that they have been doing behind closed doors with Kazakhstan and Russia being the front men. They know that there would be no winners in a military conflict so they determined that the great war of the 21st century would be economics. Our western politicians know very little really of what is going on and will only when the dust settles in another two decades. By that time it will be sorrowfully too late to act or do anything about the dire situation then. We are all in for a truly horrendous future and people in high places should really take things seriously now to prevent the worst and take alternative economic policy decisions now. There is only one solution that is outlined above if we have any intelligence at all.
The figures are in PPP. However, as the economy improves in china, the cost of services (haircut, restaurant etc) will tend to inflate faster than the economy.
In other words, the PPP value of services is not likely to increase much more in china. Will the industrial related output alone suffice to overtake the USA?
Let us not forget that the USA too has a huge population, of 300+ million and soon to become 400million in the future.
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