Will China Surpass the U.S.?
SHANGHAI — After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday. …
Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030.
I am skeptical that China will overtake the U.S. (especially if we focus on per capita GDP), but I do not discount the possibility entirely.
On the one hand, China’s growth rate will slow over time because the best opportunities for growth are the ones being exploited first.
In addition, China is hardly a bastion of capitalism. The government imposes a broad range of economic decisions on the private sector (e.g., green energy), and these “industrial policies” will prove costly down the line.
On the other hand, U.S. economic policy has shifted markedly away from economic growth and toward redistribution. So whatever mistakes Chinese policy will make, we are likely to make many of our own.
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Laura
I was reading this article about the same issue.
http://www.gobankingrates.com/investments/us-economy-still-no-1-but-for-how-long/
According to them, China may overtake the U.S. eventually, but the outcome would probably be good for U.S. pocketbooks. And most people seem inclined to think it won’t happen for another 25 years.
ElGreco
There is a huge difference (3 fold) between China surpassing the US as an economy and Chinese per capita income surpassing US per capita income. Americans often misinterpret the challenge of emerging economies and statists even distort it into an implicit endorsement for Chinese style central planning.
The issue is not whether China, India and the other emerging economies will match US per capita productivity (they cannot, unless they make their economies much freer), but rather, whether the modest supply side liberalizations they have already introduced are enough to get them to a level of even just 1/3 of US per capita income. A China and India alone that have reached just 1/3 of US per capita income, will be economies larger than the US and Europe combined.
In other words, the West either retakes the lead in supply side liberalization of their economies (i.e. incentives to produce) or it fades away into worldwide economic averagedom. While the rest of the world has embarked in, albeit modest, economic liberalization (ironically after finally realizing how far behind the US they had fallen) American economic liberalization has stalled and perhaps even reversed course in the last decade or so. The average American cannot maintain his unique enviable prosperity in this world, under these dynamics.
ck
I’m late to the party but I feel the need to chime in.
Correct me if I’m wrong but this seems somewhat uncomplicated. (Point-prediction is overly complicated, maybe impossible; but the trend seems clear.)
China’s population is 4x the US pop.
So as soon as they reach 25% of our per capita GDP, our total economies will be of equal size.
But it’s not really clear why anything other than per-capita GDP is what matters. This is not a zero-sum contest.
ck
forgotten last line: am I missing something?
FutureofUSChinaTrade
According to August/September data from the Economist Intelligence Unit, China’s economy will be bigger than the U.S.’ in 2016. (The assumptions about GDP growth rates in China and the U.S. are not unreasonable.) But I think there may be a bigger question at hand here (and I’m prepared for the deluge of angry emails): So what?
I have an idea (and this is really the raison d’être of http://FutureofUSChinaTrade.com): instead of blaming China for the U.S.’ economic woes, let’s all sit down at the table and talk about a way to engage with each other that is mutually beneficial. Some have said that trade is not a zero-sum game, but politics can make it one. So let’s agree that a mutually beneficial solution is best for everyone involved and then let’s work toward a trade framework that truly is win-win.
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