2025: Who will overtake US Economy First?

singa

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I think china's numbers are pretty inflated because they use different methods for calculating their numbers like say...they began to disburse funds directed at a sharp increase in public works spending during recession. It is important to understand that the disbursal of funds is recorded as GDP growth no other country counts it so the govt can control the pace of GDP growth by just moving funds. Shipments to retailers are counted as retail sales on the apparent assumption that ultimately all goods shipped will be sold at some point in the future again wrong counting.There are little direct data of the amount of sales.
I had been working in China 10 years before for 5 years. So I have some rights to express my opinion.
I don't think China's number are pretty inflated. On the contrary, the actual number should be higher. We have to analysis the interests of all parties. Merchant, Workers, Provincial Government, Central Government. Workers and Merchant will report their income less for less tax, Provincial Government will report higher for their officers pursuing higher position in future, while Central Government will be happy with the actual number for guiding national economy correctly. All these parties are fighting each year for their own interests.

I think in Indian it would be the same.
 

no smoking

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Provincial Government will report higher for their officers pursuing higher position in future
Actually, as matter of fact, there are 2 inclinations among provincial gov: some report a inflated data while some would like a under-reported data.

Some, especially those in fast developing provinces would like to report a lower data because lower data leads to lower fisical contribution to central gov and keep more cash in their own control next year. The secret is not how fast you are growing but how long you can keep it grow. Stabaility is more important than growth for these rich province officers. Since everyone know you are managing a province or city with good economy, fastest growing speed won't surprise anyone. For example, if this year your province economy grows at 8%, and you give this data to your leader. Then next year, your financial support from your leader will be reduced and your leader will ask a biger share of your fisical income since you are so rich. So, you should reports 4% or 5% which will still make your leader happy and keep your contribution at the same level as last year.

For those in charge of middle level areas, just you said that they will over-report their data because that is the way they can please their leader.

For the officers in poor areas, they would like to report a lower data. Why?
Firstly, everyone understands your situation, no one would blame you if no fast growth. By contrast, in these areas, the major financial source is from your leaders. So, a bad data will acquire your leader's attention and win more financial support in next years.

So, it is also a very popular phenomenon in china:"crying poor": show people how poor you are to get sympathy and money.
 

mattster

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China's economy may overtake the US by 2025 but it still doesnt mean much because China's population is still 3 times the US population, and one that is aging rapidly.

So even if China overtakes the US, it will not stay there very long, since the rapidly aging population will be consuming much less than younger people except for medicines. Plus in 15 years, China export potential will have been significantly diminished as they move to higher value products and can no longer compete on the basis of cheaper costs. Then they will have to compete on par with the West. No more copy and paste designs.

Already their currency policy is coming under fire from everyone and it will get real nasty if they dont let the yuan go up in value.

The next generation of today's young Chinese woman who are raised as the only child in 2 parent family are also not going to want to marry early and make babies.
They are going to get a proper education and put off family until their later years. All in all, a declining productive workforce kinda like what Japan is dealing with now.
That's not to mention the fact that about 50 - 100 million Chinese men will not have female partners, since there are not enough women to go around.

Bottom line: China may overtake the US economy in terms of GDP, but they wont be there for long. Most likely 10 - 20 years, before they get knocked off by India or the EU combined or Brazil. This is especially true when you also add to the fact that decades of environmental degradation in China is going to take a very heavy toll and equally heavy cost and China will have to deal with serious social/ethnic turmoil also unlike Western democracies.
 
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no smoking

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So even if China overtakes the US, it will not stay there very long, since the rapidly aging population will be consuming much less than younger people except for medicines. Plus in 15 years, China export potential will have been significantly diminished as they move to higher value products and can no longer compete on the basis of cheaper costs. Then they will have to compete on par with the West. No more copy and paste designs.
Moving to higher value products is whole idea of development, isn't it? Japan did it, South korea did it, every developed country did, I don't see why this strategy doesn't work for china. If we look at the early industrilization stage of Japan or other states, we can find that they were doing exactly same thing: copy and paste. Because at this stage, your comparative advantage is your low-cost manpower not skill or capital. After a period of time, after the accumulation of financial captial and improvement of skill in workforce/ management, you can move into next stage: use other's invention with a bit of your own innovation, just as japan's strategy in last 80s, using USA's techology in its electronic product. After that, you can talk about how to be a technology power. So, in the next 20 years, china's goal is to produce sth with better quality while still relying upon western invention. So, what you are expecting is not the case. In the contrast, the only possibility of failure is that china failed to move to higer value product still stay in current stage: the aging population with low skills and higher human cost will kill the chinese economy. That is why chinese gov keeps investing in education and science.


Already their currency policy is coming under fire from everyone and it will get real nasty if they dont let the yuan go up in value.
The problem is not whether appreciate the currency or not. Instead, it is how fast. This problem has been discussed about 10 years, but things still didn't get nasty. Why? Because those has the power to push china has no strong intention. For USA or europe, their most largest exportation is high-tech product, but they won't sell it much to china for political and security reason. So, even if china lift up currency value greatly tomorrow, it won't help these countries because they will just turn to other countries for those low-end products with even higher purchase price. The only reason they are crying about this topic is to use china as the scapegoat for their skrewed economic policy. On the other hand, for those can benefit from chinese currency appreciation, such as mexico, india, south east asia, have no much leverage to push.

So, this topic will be discussed continuely except the thing won't get nasty.

The next generation of today's young Chinese woman who are raised as the only child in 2 parent family are also not going to want to marry early and make babies.
They are going to get a proper education and put off family until their later years. All in all, a declining productive workforce kinda like what Japan is dealing with now.
The problem with japan is not the aging population, is the reduction of population. At the beginingg of birth control policy, the optimistic expection was that the decline of chinese population wouldl be 2050. So, we are still far away from it.

That's not to mention the fact that about 50 - 100 million Chinese men will not have female partners, since there are not enough women to go around.
Actually, you know that we are importing brides from our neighbours: vietname, burma, north korea and even russia. Maybe, in a short time, there will be lmany indian women married into china. So, please, don't worry for us.
 

mattster

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Non-smoking - what I was trying to say about moving up to higher value products is that you wont be able to flood other countries with your products like you currently do.
Off-course I agree with you that that is what every developing country will have to do, but success is not necessarily guaranteed.
For that matter, there is no guarantee that Chinese products with a significant cost advantage will even be successful against American, Canadian, European and South-east Asian countries.

Basically the only reason for your massive export potential currently is good infrastructure and cheap labor and cheap costs.
But Western countries also have good infrastructure, so your only advantage is cheap labor and cheap costs.

When that goes away, China will have to produce world leading technologies and companies to become a leading superpower.
The fact that you can create those top companies and top notch technology that leads the world is not necessarily guaranteed.
The competition at that level is stiff.

Also your gradually aging workforce is going to make operating in China quite expensive and will be a drain on the resources of the state.

The other thing that you have totally gotten wrong is that it is NOT raw population that matters when it comes to productivity - its the average age of the skilled workforce. As this number keeps going up as in Japan, then productivity goes down.
 
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amoy

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Just to highlight a key driving force for growth - Domestic Consumption. Despite ecstasy over GDP Chinese domestic consumption is somehow depressed. People tend to save more than spend - one of underlying factors for refrainment is China's defective social security system (medicare, pension, and unemployment). But things are changing - (like recently pension was increased) - no longer export as a booster
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China sees initial results in boosting domestic consumption


www.chinaview.cn 2009-05-21 10:21:18 Print


BEIJING, May 21 (Xinhua) -- China's domestic demand, as the government had long wished, has started to become more of a driving force for the country's economic growth than in the past.

Signs of a domestic consumption boost are apparent as people are spending more on domestic commodities, export falls, and the government plans for more consumption stimulus.

Data from the National Bureau of Statistics (NBS) last Wednesday showed that China's domestic consumption had maintained an upward trend since the beginning of the year. For example, China's retail sales rose 14.8 percent in April year on year. It was 0.1 percentage points higher than in March.

Rural spending, driven by a government rebate policy on home-appliance purchases and other commodities, grew by 16.7 percent in April, which was 2.8 percentage points higher than urban growth, according to NBS.

The booming property and auto market also showed the same trend as China became the world's largest vehicle market again with more than 1.15 million cars sold in April, up 25 percent from a year earlier.

In the housing sector, China's real-estate climate index was finally back to growth after ten months of decline. Property sales rose by 17.5 percent in acreage from a year earlier in the first four months of 2009.

The growth was 9.3 percentage points faster than the first quarter level.

"China's economic structure has started to enter a transforming period to a consumption-driven growth model," said Li Daokui, director of the Department of Finance at Tsinghua University.

SUSTAINED DOMESTIC DEMAND GROWTH

According to Li, economic growth of China's inland western and central regions, which relied less on export, had exceeded that of the coastal areas in the first quarter, reflecting a strong pull from domestic consumption and investment.

Data from regional statistics bureaus had shown that western and central China accounted for nine of the 11 provincial areas that had seen double-digit economic growth year on year in the first quarter.

Such growth was contrasted by coastal regions whose economy has been mainly driven by export, such as Shanghai, Zhejiang and Guangdong, gross domestic production (GDP) growth dropped to three- to- six percent.

"Domestic consumption, together with fixed assets investment, had become the main forces of China's economic recovery as export continues to weaken," Li told Xinhua.

His view was echoed by Zhang Liqun, a researcher with the Development Research Center of the State Council, a government think-tank, who said the continual growth in domestic consumption had provided "very strong" power for China's economy to move on.

China's surging loans also implied booming domestic consumption, as personal loans saw accelerating growth from 7.5 percent in January to 24.9 percent in April year on year, according to the central bank.

Lian Ping, chief economist with the Bank of Communications, said a personal loans surge showed that banks had begun to pay attention to consumer loans in a move to boost domestic demand.

With the same intention, China Securities Regulatory Commission (CSRC) announced this week that it plans to let non-deposit-taking institutions both home and overseas to offer consumer loans to Chinese citizens in pilot cities like Beijing, Shanghai and Tianjin.

According to CSRC's plan, debtors will be able to borrow loans so long as they are less than five times of their monthly income.

Government stimulus policies have been playing a big part in consumption growth, such as reducing purchase taxes for small cars and subsidies for farmers to buy agricultural equipment, said Yuan Gangming, an economic researcher at Tsinghua University.

EXPORT: WEAKENING, BUT SIGNIFICANT

In sharp contrast with the booming domestic market, China's export is facing continuous slump from the fourth quarter last year.

Exports fell 22.6 percent in April from a year earlier to 91.94billion U.S. dollars, steeper than the 17.1-percent decline in March, according to the General Administration of Customs.

Long-term orders had been continuously cut into smaller and shorter ones by foreign buyers, which would make exporters' benefits unstable and unsustained, according to a report on the Web site of the Ministry of Commerce (MOC).

Canton Fair, China's leading trade fair that ended early this month, saw export orders fall by 16.9 percent from last year.

However, the MOC report had stressed that stabilizing external demand was key to maintaining growth, as the "grim" impact could affect "all sectors" of the economy.

Sluggish external demand, which had a significant bearing on stabilizing exports and employment, could deter domestic investment and consumption for a long period, it said.

RESTRUCTURING: A LONG-TERM BATTLE

Despite favorable economic data on domestic demand, economists had warned that time for China to retool its economy for domestic consumption might be longer than expected.

"There is still a long way to go," said Li Daokui, pointing out that the infrastructure-focused government spending and rising domestic consumption could provide stable and continual energy to economic recovery, but it might not be the solution in the long run.

Consumption had been rising, but far from enough, as it had so far accounted for only 38 percent of China's GDP, which was not adequate to become a pillar for long-term growth, he said.

Xie Guozhong, economist and board member of Rosetta Stone Advisors, said during the second Lujiazui Forum over the weekend that consumption boosted mainly by government stimulus could only temporarily keep the economy from going down.

Economic restructuring would only be completed when consumers are provided with abundant fortune, which means the government needs to do more to increase family incomes, he said.

Coinciding with economists' opinions, the government is planning to move further on its way to a consumption-heavy growth model.

Wang Yiming, vice president of Academy of Macroeconomic Research under NDRC, pointed out that China's next step would be further consumption expansion through either offering direct purchase subsidies or perfecting social security system.

The government's affordable housing projects and further implementation of health care reform are included in building a perfect social security system, said Xu Lin, head of the Department of Fiscal and Financial Affairs, NDRC.

(Xinhua reporter Zhang Ran also contributed to this story)
 

no smoking

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Non-smoking - what I was trying to say about moving up to higher value products is that you wont be able to flood other countries with your products like you currently do.
Off-course I agree with you that that is what every developing country will have to do, but success is not necessarily guaranteed.
For that matter, there is no guarantee that Chinese products with a significant cost advantage will even be successful against American, Canadian, European and South-east Asian countries.

Basically the only reason for your massive export potential currently is good infrastructure and cheap labor and cheap costs.
But Western countries also have good infrastructure, so your only advantage is cheap labor and cheap costs.
Well, that is exactly why we call it competition, right? You have to struggle to survive. Flooding the world market is not the point, geting profit from this flooding is more important. With the money earned from this trade, you can improve your workforce skill and talent pool. In other words, China must give up its advantage in cheap labor cost. If china failed to do so, there is guarantee that china will be trapped in early industrilization because its workforce's skill level can only produce those low-end product.

When that goes away, China will have to produce world leading technologies and companies to become a leading superpower.
The fact that you can create those top companies and top notch technology that leads the world is not necessarily guaranteed.
The competition at that level is stiff.
Yes, there will never be any easy way to win. So, what you say is pointless. India's strategy should make india without any external condition. I read from your post sounds like that india is just waiting for china-iteself to step down from top.
 

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