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It's Official: China is #2

China is now the world's second largest economy, toppling Japan after 42-years in the contender's box. Purchasing-power-parity adjustments favor developing countries like China and somewhat skewer GDP data. And per capita GDP in China is a poverty-level $4,412, compared to $42,431 in Japan. But, China's emergence must be recognized.

Speculation has it that China will overtake the U.S. by 2020. I think it doubtful. China's continued rise depends upon a number of stability factors subject to doubt in an authoritarian regime. Further, China's per capita GDP (or quality of life standard) is not competitive.

It's not yet time to begin speaking of a new Evil Empire. But China would love the title.

Categories > Economy

Discussions - 2 Comments

Yes, we have been very short-sighted about China, particularly our corporations (who seem intent on profits to the exclusion of everything else). We've been lulled into complacency by the notion that affluence breeds democracy, and democracy heals all rifts.

Half of all foreign investment now goes to China. And they are beginning to build nuclear subs and stealth aircraft. Hmm...maybe Lenin's admonition that capitalists would sell you the rope you hang them with is accurate after all.

I think they will make it by 2020, but I would focus on the low GDP as well.

I think they will make it in part by allowing the currency to appreciate against the dollar (thus inflating GDP measured in dollars.) They again by keeping the currency down against the dollar they gain an export advantage.

China has passed Germany and Japan within the time frame of analyst estimates.

Notice that since 2007 the Yan has gone from $.12 per Yan to $.1516 per Yan. depending on how you read our trade deficit with China the actual value of the Yan could be almost 20 cents...lets say the budget deficit picture in the U.S. gets worse and by 2012 the Yuan is worth around 30 cents and assume a series of gradual shifts upward hitting $.25 per Yuan that is a 66% boost on whatever the actual growth in the economy is, and you can be sure that China will slide the peg upwards in response to our deficit spending, but at a pace that macroeconomic data tells them best maintains exports.

"maybe Lenin's admonition that capitalists would sell you the rope you hang them with is accurate after all."

Well the chinese actually buy our macro-economists, or get them educated here.

I am calling Yan at $.25 on the dollar by 2020 which means that only 33% of the growth in GDP measured in dollars has to be real. 15% growth only needs to be 5%excetera.

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