2025: Who will overtake US Economy First?

indopak5

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2025: Who will overtake US Economy First? Is it China? Or India? , only these 2 countries can do this bcoz of their BIG population. As far as i know it was china which will overtake US Economy near 2025. But i am damn sure that US-India are going to play some cards that will change everything. So guys please put some light on this TOPIC. Who is going to overtake US economy First? Will india ever be the Biggest economy and what will be india's economy in 2050? And If India going to be the biggest economy anytime, what will be the chinese economy at that time?

I am sure that china is way ahead from india but recent recession has changed many things. How is this recession going to affect chinese economy and its position in world economy.
 

Martian

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The best reasonably reliable forecast that is available is from the IMF, dated October 2009. See List of countries by future GDP (nominal) estimates - Wikipedia, the free encyclopedia

Five years from now, in 2014:

US: 17.4 trillion (1st)
China: 8.3 trillion (2nd)
India: 1.9 trillion (10th)

By 2025, to catch China's 2014, India will have to quadruple her GDP. 1.9 trillion x 4 = 7.6 trillion.

But if you want to speculate, there are some people who believe that China's GDP in 2050 will be double the size of US GDP.

"By 2050, he estimated Chinese GDP at some $82 trillion compared with $44 trillion for the US." See http://www.finfacts.ie/irishfinancenews/article_1014151.shtml

The question is whether the prediction that Chinese GDP will be significantly larger than US GDP in 2050 is plausible. I'm a fan of MIT's Lester Thurow, who said that electricity usage cannot be manipulated and is the best reflection of a nation's economic activity.

China's current electricity usage at 3.3 terawatt-hours is already pretty close to America's 3.9 terawatt-hours (see http://www.photius.com/rankings/economy/electricity_consumption_2009_0.html). A reasonable question is whether China will be able to continue increasing her electricity usage and hence, her economy.

Looking at the list of hydroelectric dams under current construction and the additional dams being proposed (see bottom of page at http://en.wikipedia.org/wiki/Hydroelectric), there is reason to believe that China can keep going; assuming that dams are a good proxy for Chinese energy planning that encompasses coal, nuclear, hydroelectricity, wind, solar, biomass, etc.

Another reasonable question is whether we believe the predictions. Is China really catching up to the US? "At official exchange rates in 2007 China's GDP was 24 per cent of that of the US - $3.3 trillion compared to $13.8 trillion." See http://socialisteconomicbulletin.blogspot.com/2009/01/new-data-on-chinas-gdp-and-its-total.html

Crunching the numbers from the latest IMF results for 2009, China's GDP as a percent of US GDP is 30% (4.757 trillions/14.266 trillions).

In the two years from 2007 to 2009, China's GDP has climbed from 24% to 30% of US GDP. The IMF is projecting that in 5 years, China's GDP will be almost 50% of US GDP. The trend shows that the scenario of China overtaking US in GDP is plausible. However, the future is uncertain. We can only wait and see.

Most of the websites that I've read predicted that Indian GDP in 2050 will be roughly 88% of US GDP. 88% of $44 trillion is about $40 trillion dollars. Most websites believe the GDP rank in 2050 is China, US, and India.
 

nimo_cn

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No country can overtake US in 2025, US will still be the NO.1 in at least 50 years.
It is possible that some country can surpass US, but that will not happen in the near future.
 

Martian

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Why not? There's nothing sacrosanct about the US having the largest GDP. Two factors are necessary for China to catch the US.

First, China needs continuous high growth of 6 to 9% a year for another 15 to 20 years. Is this possible? I don't see why not. China's per capita GDP is only $3,259 (#104 in the world) versus US per capita of $47,440 (#13). We can see that China has plenty of room to grow in its per capita GDP. See List of countries by GDP (nominal) per capita - Wikipedia, the free encyclopedia

Second, after the world economy recovers from the financial shock, China's currency is likely to resume its increase. China's currency has already increased 20% versus the US dollar over the last 4 years.

"On 21 July 2005, the peg was finally lifted, which saw an immediate one-off RMB revaluation to 8.11 per USD.[20]"

"On September 30, 2008, the renminbi traded at 6.7899 yuan per U.S. dollar, which is a 21.9% increase and the highest rate since the removal of the peg." See Renminbi - Wikipedia, the free encyclopedia

Between the twin factors of significantly higher economic growth rate versus the US and an appreciating currency, China has the ability to catch US annual GDP in the next 15 to 25 years. Whether it will actually happen is an exciting horse race that all of us get to watch.

Ten years ago, China's GDP was only 7th in the world. China's GDP was only 12.6% of US GDP (1.158 trillion/9.213 trillions). See http://en.wikipedia.org/wiki/List_of_countries_by_past_GDP_(nominal)

Ten years ago, if I told you that in one decade China's percentage of US GDP would jump from 12.6% to 30%, you would have said impossible. A lot can happen in ten to fifteen years.
 

Vladimir79

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Well, it certainly won't be China. Their asset bubble and price fixing are going to be blowing up in their face once the US dollar appreciates in value. They can only cover up their inflated numbers for so long. Once it does, they will drop 29% in asset value and find themselves with a static GDP. Capital flight will occur so fast it will make your head spin. If I had to wager on who will be first to overtake the US, it would be the EU. Once The Lisbon Treaty is ratified it will be centralised enough to be considered a state of its own. They already outpace US GDP.
 

icecoolben

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India would be at no:4 at $ 7 trillion trailing japan by less than a trillion. China would be lacking by at least $2-3 trillion to the US's 19$ trillion. But this would depend on the US retaining the dollar as the sole reserve currency. By 2050, china would be an economy 1.75 times that of US. While the US would have a gdp of $ 42 trillion and india closely behind with a 1-2 trillion deficit.
But still by per capita income. The padingram probably won't change US at 94,000 , japan at 80,000. With india at 8,000 and china roughly double that.
 

sky

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2025 is to soon for either india or china,but 2050 is a diffrent story. no-one here is a fortune teller and so it would be better, to do the simple thing's right and not to worry about the long term as one one can predict that.

It's only by shear force of will and dedication any nation rises to the the top spot,both india and china have a very long way to go.But on a positive note,india has a very young population and if that can be harnessed then the world better watch out......
 

icecoolben

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Unless there is war, or a huge catestrophe. India and China will forge ahead. China was the world's largest economy by 16-17 century. India was also in a similar position before the advent of british and history has a habit of repeating itself.
 

Martian

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That's true icecoolben. My brother likes to say that things revert to the mean. While I do not know the pace of Indian development and industrialization, it cannot be disputed that it will occur. The historically important positions of India and China in the world are already reasserting themselves.
 

Daredevil

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I don't think China will be able to overtake US by 2025, it would be more like 2050. The reason being, it is difficult for China to sustain 10% growth rate forever and the recent recession gave a big jolt to its plans. China's GDP depends mainly on Exports which in turn depends on excessive consumption by western countries mainly US. With the advent of recession in all major western economies, there is strong belief of experts that the consumption levels will take at least a decade to reach pre-recession levels. Under such scenario, China is very unlikely to sustain 10% growth rate due to decline in exports and dependent manufacturing. The only way it can grow at those rate is by increased domestic consumption which is very weak in China even if compared to India. So, China is now giving stimulus to the order of 18% of GDP to increase consumption and it also increased government spending and thus showing increased growth rate. But this is not sustainable for more than 5 years. Interesting times ahead.
 

johnee

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X-posting. This article puts in context, China's economic condition specially in this recession. For them to sustain the growth of 9% for a decade is really uphill task. We really dont know what is the real situation of Chinese economy.


How China Cooks Its Books

It's an open secret that China has doctored its economic and financial statistics since the time of Mao. But could it all go south now?

BY JORDAN CALINOFF | SEPTEMBER 3, 2009

In February, local Chinese Labor Ministry officials came to "help" with massive layoffs at an electronics factory in Guangdong province, China. The owner of the factory felt nervous having government officials there, but kept his mouth shut. Who was he to complain that the officials were breaking the law by interfering with the firings, he added. They were the law! And they ordered him to offer his workers what seemed like a pretty good deal: Accept the layoff and receive the legal severance package, or "resign" and get an even larger upfront payment.

"I would estimate around 70 percent of workers took the resignation deal. This is happening all over Guangdong," the factory owner said. "I help the Department of Labor, and they'll help me later on down the line."

Such open-secret programs, writ large, help China manipulate its unemployment rate, because workers who "resign" don't count toward that number. The government estimates that roughly 20 million migrant factory workers have lost their jobs since the downturn started. But, with "resignations" included, the number is likely closer to 40 million or 50 million, according to estimates made by Yiping Huang, chief Asia economist for Citigroup. That is the same size as Germany's entire work force. China similarly distorts everything from its GDP to retail sales figures to production activity. This sort of number-padding isn't just unethical, it's also dangerous: The push to develop rosy economic data could actually lead China's economy over the cliff.

Western media outlets often portray Chinese book-cooking as part and parcel of a monolithic central government and omnipotent Beijing bureaucrats. But the problem is manifold, a product of centralized government as well as decentralized officials.

Pressure to distort or fudge statistics likely comes from up high -- and it's intense. "China announces its annual objective of GDP growth rate each year. In Chinese culture, the government has to reach the objective; otherwise, they will 'lose face,'" said Gary Liu, deputy director of the China Europe International Business School's Lujiazui International Financial Research Center. "For instance, the government announced that it wanted to ensure a GDP growth rate of 8 percent in 2009, and it has become the priority for government officials to meet that objective."

But local and provincial governmental officials are the ones who actually fiddle with the numbers. They retain considerable autonomy and power, and have a self-interested reason to manipulate economic statistics. When they reach or exceed the central government's economic goals, they get rewarded with better jobs or more money. "The higher [their] GDP [figures], the higher the chance will be for local officials to get promoted," explained Liu.

Such statistical creativity is nothing new in China. In 1958, Chairman Mao proclaimed that China would surpass Britain in steel production within 15 years. He mobilized villages throughout China to establish backyard steel furnaces, where in a futile attempt to reach outrageous production goals, villagers could melt down pots and pans and even burn their own furniture for furnace fuel. This effort produced worthless pig iron and diverted enough labor away from agriculture to be a main driver in the devastating famine of the Great Leap Forward.

Last October, Vice Premier Li Keqiang said in a speech after inspecting China's Statistics Bureau, "China's foundation for statistics is still very weak, and the quality of statistics is to be further improved" -- a brutally harsh assessment coming from a top state official.

Indeed, China has predicated its very claim of being the healthiest large economy in the world on faulty statistics. The government insists that even though China's all-important export sector has been devastated -- contracting about 25 percent in the past year -- a massive uptick in domestic consumption has kept factories producing and growth churning along. A close examination of retail sales and GDP growth, however, tells a different story. China's domestic retail sales have risen about 15 percent year on year, but that does not really translate into Chinese consumers purchasing 15 percent more televisions and T-shirts. The country tabulates sales when a factory ships units to a retailer, meaning China includes unused or warehoused inventory in its consumption data. There is ample evidence that state-owned enterprises buy goods from one another, simply shifting products back and forth, and that those transactions count as retail sales in national statistics.

China's retail statistics seem implausible for other reasons, too. They would imply an increase in salaries among Chinese people, allowing them to purchase that extra 15 percent. To be sure, the Statistics Bureau reported salaries had increased 12.9 percent in the first half of 2009. But Chinese netizens complained such numbers were hard to believe -- as did the bureau's chief.

A look at GDP growth also raises serious questions. China's economy grew at an annualized 6.1 percent rate in the first quarter, and 7.9 percent in the second. Yet electricity usage, a key indicator in industrial growth and a harder metric to manipulate, declined 2.2 percent in the first six months of the year. How could an economy largely dependent on manufacturing grow while its industrial sector shrank?

It couldn't; the numbers don't add up. China announced a $600 billion stimulus package (equal to about 14 percent of GDP) last fall. At that point, local governments started counting the dedicated stimulus funds in GDP statistics -- before finding projects to use the funds, and therefore far before the trillions of yuan started trickling into the economy. Local governments keen to raise their growth and production numbers said they spent stimulus money while still deciding on what to spend it, one economist explained. Thus, China's provincial GDP tabulations add up to far more than the countrywide estimate.

Alternative macroeconomic metrics, such as the purchasing managers' index (PMI), which measures output, offer a no more accurate reflection. One private brokerage house, CLSA, compiles its own PMI, suggesting a sharp contraction in industrial output between December 2008 and March 2009. Beijing's PMI data, on the other hand, indicated that industrial output was expanding during that period.

Unfortunately, such obfuscation means China's real economic health is difficult to assess. Most indicators that would help an intrepid economist correct the government numbers -- progress on infrastructure projects, end-user purchases, and the number of "resigned" workers -- are not public.

Still, it is possible to infer the severity of the gap between economic reality and China-on-paper by looking closely at monetary policy. China's state-owned banks dramatically increased lending in the first half of 2009 -- by 34.5 percent year on year, to more than $1 trillion. This move seems intended to keep growth artificially high until exports bounce back. Most analysts agree that it is leading to large bubbles in the stock, real estate, and commodity markets. And the Chinese government recently announced plans to raise capital requirements -- an apparent sign it sees the need to reign in the expansion.

For the long term, China is banking on its main export markets -- in the United States, Europe, and Japan -- recovering and starting to consume again. The hope is that in the meantime, rosy economic figures will placate the masses and stop unrest. But, if the rest of the world does not rebound, China risks the bursting of asset bubbles in property and stocks, declining domestic consumption, and rising unemployment.

That's when the Wile E. Coyote moment could happen. Once Chinese citizens no longer believe that the economy is doing well, social unrest and more widespread worker riots -- already increasing in scope and severity -- are likely. That's something that China will have a harder time hiding. And then we'll know whether China's statistical manipulation was a smart move or a disastrous mistake.
 

Martian

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johnee, do you really believe that the Asian Development Bank (ADB), IMF, and World Bank are all lying about China's growth and that China is really "cooking the books?"

"Graphics shows the forecast of China's year-on-year economic growth in 2009 revised up to 8.2 percent by the Asian Development Bank on Sept." See China's 2009 GDP growth revised up to 8.2%_English_Xinhua

"Last October the IMF forecast China's GDP would grow at 8% in 2009." See China’s 2009 GDP growth : Core Economics

"The World Bank raised its 2009 economic growth forecast for China from 6.5 percent to 7.2 percent due to its stimulus-driven" See WB raises China 2009 growth forecast to 7.2%

Why would all of these different international institutions lie about China's growth? Does that mean the growth rates published for all countries by the ADB, IMF, and World Bank are all lies and cooking of the books too? Or do you think the published growth rates are a good reflection of reality and the conspiracy nuts (that keep claiming that China's growth is fake) are living in their fantasy world?
 

Vinod2070

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Well, as of now it is fair to say that China has a big lead over India in economy. So by all accounts they would be there first, whenever that happens. Their lead is large and increasing as of now.

But they do have many chinks in their armour and India does have some strengths that can help us reduce the gap in the near future. I think the effects of the one child policy will catch up very soon with them, reducing the ratio of productive age people vs. the dependents. Also as has been pointed out, they are more dependent on exports which would be really difficult to sustain at the previous growth rates. Their economy is also much more resource intensive.

We have a fair stab at overtaking them in the next few decades if we get our act together.
 

Vladimir79

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johnee, do you really believe that the Asian Development Bank (ADB), IMF, and World Bank are all lying about China's growth and that China is really "cooking the books?"

"Graphics shows the forecast of China's year-on-year economic growth in 2009 revised up to 8.2 percent by the Asian Development Bank on Sept." See China's 2009 GDP growth revised up to 8.2%_English_Xinhua

"Last October the IMF forecast China's GDP would grow at 8% in 2009." See China’s 2009 GDP growth : Core Economics

"The World Bank raised its 2009 economic growth forecast for China from 6.5 percent to 7.2 percent due to its stimulus-driven" See WB raises China 2009 growth forecast to 7.2%

Why would all of these different international institutions lie about China's growth? Does that mean the growth rates published for all countries by the ADB, IMF, and World Bank are all lies and cooking of the books too? Or do you think the published growth rates are a good reflection of reality and the conspiracy nuts (that keep claiming that China's growth is fake) are living in their fantasy world?
All these institutions base their numbers on what the Chinese Central Banque provides.
 

indopak5

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johnee, do you really believe that the Asian Development Bank (ADB), IMF, and World Bank are all lying about China's growth and that China is really "cooking the books?"

"Graphics shows the forecast of China's year-on-year economic growth in 2009 revised up to 8.2 percent by the Asian Development Bank on Sept." See China's 2009 GDP growth revised up to 8.2%_English_Xinhua

"Last October the IMF forecast China's GDP would grow at 8% in 2009." See China’s 2009 GDP growth : Core Economics
"The World Bank raised its 2009 economic growth forecast for China from 6.5 percent to 7.2 percent due to its stimulus-driven" See WB raises China 2009 growth forecast to 7.2%

Why would all of these different international institutions lie about China's growth? Does that mean the growth rates published for all countries by the ADB, IMF, and World Bank are all lies and cooking of the books too? Or do you think the published growth rates are a good reflection of reality and the conspiracy nuts (that keep claiming that China's growth is fake) are living in their fantasy world?
Thanks for replying Martian," But what i am thinking is, will US allow china to become the biggest economy?" see what i know is , its only US which can change the world economy or World Order. If US once decided, india can become the swing state. really it would be very interested to see what these 3 countries(US, india, china) do further.
 

indopak5

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i think it will be india. but a long time for that. i am sure that US-India are already playing some big cards. Coz i never seen US too much interested in india or india Interested in US. They are going to change everything.
 

Martian

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"will US allow china to become the biggest economy?"

I think it is too late for the US to shut China down. The US made some critical decisions that allowed China to grow at phenomenal rates. First, Nixon (and Kissinger) established trade relations with China in 1971.

"That same day, the U.S. announced plans to remove a 20-year embargo on trade with China." See The American Experience | Nixon's China Game | People & Events | Ping-Pong Diplomacy

"The U.S. Trade Rep. explains the U.S.-China trade deal ... China” were almost nonexistent, until 1972" See NewsHour Extra: Trade Relations With China - May 25, 2000 or 1972 Nixon visit to China - Wikipedia, the free encyclopedia

That's the first critical step. The US market, the world's largest, is now open to China.

Second, the US extended Most-Favored-Nation (MFN) trading privileges to China.

"Clinton Grants China MFN, Reversing Campaign Pledge." See http://tech.mit.edu/V114/N27/china.27w.html

"In the 1990s, continued most favoured nation status for the People's Republic of China created controversy because of its sales of sensitive military technology. China's most favoured nation status was made permanent in 2000. All of the former Soviet states, including Russia, were granted most favoured nation status in 1992. On a bilateral level, however, the United States cannot grant MFN status to some members of the former Soviet Union, including the Russian Federation, because of the Jackson-Vanik amendment. This presents an obstacle to those countries' accession to the WTO.[1]" See Most favoured nation - Wikipedia, the free encyclopedia

Third, the US agreed to let China join the WTO in 2001.

"Press release, 17 September 2001; WTO Ministerial Conference approves China's accession." See WTO | China - Member information

Without full American cooperation, China could not have become the export powerhouse that it is today.

"Aug 26, 2009 ... 26 -- China's rise as the world largest exporter" See China becomes world largest exporter for first time_English_Xinhua

China has grown beyond anybody's expectations. China is too large a part of the world economy. Also, the US is heavily indebted to China. These two factors indicate that the US no longer possesses the power to stop China's further economic progress.

"The American and Chinese economies are intertwined, and the success of one depends on the health of the other.

The United States is China's biggest trade partner. Americans bought Chinese goods worth $338 billion last year. Beijing is Washington's biggest creditor, with more than $800 billion invested in government debt. American automakers look to China's growing market to propel future sales.

The financial crisis set back U.S. growth by years and will add trillions to the federal debt over the next decade. But China avoided the worst of the crisis. Its banks are healthy and, with the help of a 4 trillion yuan ($586 billion) stimulus, this year's economic growth is on track to top 8 percent.

Already, demand from China can affect oil prices, and it is starting to influence what products are available worldwide. Western jobs are tied to Chinese spending, from British auto factories to Australian iron mines. Chinese money is financing development of oil fields from Venezuela to Central Asia.

And China's role as Washington's lender-in-chief is altering the dynamic of the countries' relationship.

At a meeting in London in April, President Barack Obama assured his Chinese counterpart, Hu Jintao, that Washington would cut its budget deficit — a promise no American leader ever had to make to a Soviet leader.

Washington's 3-year-old strategic dialogue with Beijing has long been dominated by U.S. trade grievances. But the latest round in July, overshadowed by America's need for China to keep buying its debt, became a discussion between equals." See http://www.mercurynews.com/business/ci_13517840

Regarding India, the US can indeed open many doors for India. However, Indian businesses will still have to compete in the world marketplace. China was lucky. Back in the old days, during the 1970s-1990s, there were fewer economic competitors. Today, as India tries to grow her exports, she will run into China, which occupies many rungs on the economic ladder.
 

Martian

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"All these institutions base their numbers on what the Chinese Central Banque provides."

China is the world's second-largest consumer of electricity (more than the entire EU; see Electricity - consumption(kWh) 2009 country ranks). The world's second-largest consumer of oil. And the world's largest exporter that has piled up a world record $2.1 trillion dollar forex reserve.

China is also the world's largest car market. "Partnerships with West have given it needed technology; now it's the world's biggest car market, having passed the US this year." See China's auto industry shifts into high gear | csmonitor.com

Would you say that the IMF, World Bank, and CIA are correct in saying that China has the world's third largest economy? See List of countries by GDP (nominal) - Wikipedia, the free encyclopedia
 

nimo_cn

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Thanks for replying Martian," But what i am thinking is, will US allow china to become the biggest economy?" see what i know is , its only US which can change the world economy or World Order. If US once decided, india can become the swing state. really it would be very interested to see what these 3 countries(US, india, china) do further.
By that logic, i am wondering if US will allow India to be the first.
 

Vladimir79

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"All these institutions base their numbers on what the Chinese Central Banque provides."

China is the world's second-largest consumer of electricity (more than the entire EU; see Electricity - consumption(kWh) 2009 country ranks).The world's second-largest consumer of oil.
China is also one of the most inefficient users of energy too.

And the world's largest exporter that has piled up a world record $2.1 trillion dollar forex reserve.
Most of it tied into the underperforming dollar. They are losing money by keeping it there.

China is also the world's largest car market.
Because they spent hundreds of billions to subsidise their auto industry. They aren't making money buying their people cars.

Would you say that the IMF, World Bank, and CIA are correct in saying that China has the world's third largest economy?
As I said, those agencies go off China's Central Banque statistics which are doctored. The Chinese domestic economy is a ponzy scheme supported by export revenues and FDI. Two fifths of the Chinese economy is real, which are exports. Three fifths of it are 2/3rds subsidised making it artificial. When the CCP can no longer cover the balance sheets for those artificial markets, you are going to see a huge chunk of the Chinese economy vaporised. That is why China will never overtake the US.
 

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