Chinese economy passes USA to become the largest economy in the world

Discussion in 'China' started by LETHALFORCE, Dec 6, 2014.

  1. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    It’s official: America is now No. 2 - MarketWatch
    Hang on to your hats, America.

    And throw away that big, fat styrofoam finger while you’re about it.

    There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.

    It just happened — and almost nobody noticed.


    The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.

    As recently as 2000, we produced nearly three times as much as the Chinese.

    To put the numbers slightly differently, China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S.

    This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.

    I reported on this looming development over two years ago, but the moment came sooner than I or anyone else had predicted. China’s recent decision to bring gross domestic product calculations in line with international standards has revealed activity that had previously gone uncounted.

    Making millions using China's Twitter(9:26)
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    These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders.

    Make no mistake. This is a geopolitical earthquake with a high reading on the Richter scale.
    PPP is the real way of comparing economies. It is one reported by the IMF and was, for example, the one used by McKinsey & Co. consultants back in the 1990s when they undertook a study of economic productivity on behalf of the British government.

    Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. But such measures, although they are widely followed, are largely meaningless. Does the U.S. economy really shrink if the dollar falls 10% on international currency markets? Does the recent plunge in the yen mean the Japanese economy is vanishing before our eyes?

    Back in 2012, when I first reported on these figures, the IMF tried to challenge the importance of PPP. I was not surprised. It is not in anyone’s interest at the IMF that people in the Western world start focusing too much on the sheer extent of China’s power. But the PPP data come from the IMF, not from me. And it is noteworthy that when the IMF’s official World Economic Outlook compares countries by their share of world output, it does so using PPP.

    Yes, all statistics are open to various quibbles. It is perfectly possible China’s latest numbers overstate output — or understate them. That may also be true of U.S. GDP figures. But the IMF data are the best we have.

    Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.

    This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.
     
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  3. badguy2000

    badguy2000 Respected Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    don't take it tooo seriously chinese per capita Gdp is still only 1/4-1/ 6 of USA. China is still A 3rd world county.
     
  4. tarunraju

    tarunraju Moderator Moderator

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    Re: Chinese economy passes USA to become the largest economy in the wo

    But there are more people in China with first-world incomes than there are people of any kind in the US.

    Mapping China’s middle class | McKinsey & Company
     
  5. badguy2000

    badguy2000 Respected Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    people should pay more attention to some other indicators such as 'per capita electricity consumption','per capita house' ,'per capita auto sale' etc. those indicator is the better one than per capita Gdp To metric people's real life quality
     
  6. no smoking

    no smoking Senior Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    And there are more people in China with third-world incomes than people of any kind in the US and Europe together.
     
  7. prohumanity

    prohumanity Regular Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    This is all acoounting mumbo-jumbo to create sensation and make people watch 24/7 junk news channels like CNN. Look carefully, US population is 330 million and Chinese population is 1300 million. Even if economies are almost equal, US economy is still 4 times based on per capita GDP.
    I still stand by my previous assertion that US is in relative decline but its not collapsing overnight. US will have to change its stupid policies, take care of its own people ,invest in their health and education and stop unnecessary war and intimidation of other nations.
     
  8. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    Re: Chinese economy passes USA to become the largest economy in the wo

    China is still growing at 8 percent of better . USA is able to get 2 percent with the government
    Pumping a lot of the money into the economy and keeping the printing presses rolling.
     
  9. Sylex21

    Sylex21 Regular Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    It's not that nobody noticed, it's that nobody really cares while it's in PPP. When it becomes nominal everyone will make a big deal of it. China may need till 2050 or even longer to surpass the USA in actual GDP. Not saying it isn't a big deal, but simply that it is the American and generally global mentality.
     
  10. Sylex21

    Sylex21 Regular Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    China is growing at 7.3% which is a big decrease from the 10% a year or two ago. USA is up to over 4%.
     
  11. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    Re: Chinese economy passes USA to become the largest economy in the wo

    Us growth is not true organic growth but growth stimulated by extremely low interest rates ,
    Government pumping money and now low energy prices and wars. Real growth from leading
    Sectors industrial or fueled by technology ( except Apple) is not there. And wage increases that come
    From true growth are non existent. Middle class is becoming smaller and USA is becoming a
    Two class country rich and poor.
     
  12. roma

    roma NRI in Europe Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    that's also true ....... but still congratulations are due to the chinese people

    fantastically well done - it is likely that all this momentum you are creating in the economic zone
    is going to change the world in a way we have never seen before .
     
  13. mattster

    mattster Respected Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    What about growth in China where the govt controls everything from interest rates to exchange rates for rennimbi to industrial policy to bank loan policies to housing.
    Is that organic ??

    What about all the empty high-end apartments all over China that are sitting empty - is that a result of organic growth ??
    China's Booming Real Estate Market Finally Begins To Slide : NPR

    Sure interest rates are artificially kept very low to stimulate growth......but which industrialized country isnt doing that ?

    What do you expect them to do........follow the Indians. My dad has an account in a small private bank that pays almost 10% interest.
    In the US......you would be lucky today to get even 1% on a CD for a year.
    So why should anyone invest in anything or a business in India when the bank is giving you 10%......no wonder that Indians hoard cash and gold.
     
  14. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    Re: Chinese economy passes USA to become the largest economy in the wo

    The way the article began, I thought for a moment that China had overtaken US in nominal GDP. I was shocked for a moment, then I realized that they were talking about PPP.

    Here's the thing: GDP by PPP is a good measure to find out living standards within a country. But while comparing different nations, GDP nominal is the only way to go.
     
  15. amoy

    amoy Senior Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    Indeed when the bank interest rate is so high (phewww 10% or above) virtually at zero risk, nobody is interested in business ventures unless it can churn out a return far far above that 10% benchmark also due to such a high financing cost.

    Most people are risk aversive.

    [​IMG]
     
  16. badguy2000

    badguy2000 Respected Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    in 5-10years, china's nomial Gdp is to.surpass USA too. but it will.bot be big deal too,because china has 4 times more population than USA after all. only after china's per capita GDP has match USA,it will deserve applause.
     
  17. Compersion

    Compersion Senior Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    larger numbers for a large country ... there simply has not been such a example on a large scale ever done before. (perhaps Germany post world war I is closest example).
     
  18. ezsasa

    ezsasa Senior Member Senior Member

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    Re: Chinese economy passes USA to become the largest economy in the wo

    Both for China and india, GDP comparison with US is relevant only in the case of per capita GDP. Unless per capita GDP increases this has no relevance for ordinary citizens.
     
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