China Won't Surpass the U.S.?

[Teallaura]

It’s time to uncrown the Red Dragon. China will not become the world’s largest economy in the next decade.
The claims fall apart due to flawed measurements and the serious weaknesses overlooked in the Middle Kingdom’s economy. China is still significantly smaller and less wealthy than the U.S.
“China will become the world’s largest economy in 2024,” says IHS in a new report, echoing similar forecasts which have popped up intermittently since the financial collapse in 2008.
Even the IMF does not forecast China overtaking the U.S. later this decade. By 2019 (the end-point of IMF projections), its estimate for U.S. GDP shows the U.S economy will be nearly 60% greater than China’s, $23.4 trillion versus an estimate of $14.8 trillion for China.
Unless China completely liberates its economy by 2019 to suddenly blow its GDP out by 60% within a short five-year time frame, the U.S. will still be tops.



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To be honest, I always regarded the 'China is gonna overtake the U.S.' thing as hype. I was equally skeptical in the '80s when Japan was supposedly about to become the greatest economic power on Earth (that's not much of an exaggeration of the hyperbole of the time). In my limited experience, when an economy becomes red hot something invariably happens to cool it down - and I've never understood why projections fail to take that factor into account.

The U.S. has its big advantages as enumerated in the blog, but to my mind, one of its greatest assets is its ability to handle the messy, inevitable people stuff - aka politics. The U.S. does a fairly decent short term and a fairly good long term job of sorting out 'fair' versus 'unfair'. Perfect? Of course not - humans being human, after all. But businesses are more willing to do business in the U.S. that involves asset outlay and real risk because they have confidence that their interests can be defended (whether by lobbying or in court). Yes, multinationals will put money into less respectable nations - but they don't move their operations/headquarters there. Google is still firmly based in the U.S. despite their weird inability to get office space (a barge? Seriously?). If the U.S. does manage to drive them out, it's to Western European nations and that snowy thing to the north (aka Canada) - not Third World nations, and not even emerging economies like China and India. You don't go where the risk is too high.

That's a large part of why I never thought the 'China threat' was more than hype. Yes, they are growing - and I'm glad for them there (not to mention its an opportunity for the U.S.... ) but their political structure is a major league hamper on their overall ability to grow. Since that shows no sign of budging - yet - I didn't and don't see why everyone is/was so convinced China could overtake the U.S. economically.

[Paprika]

I didn't and don't see why everyone is/was so convinced China could overtake the U.S. economically.

I don't think everyone was. As always, the media reports the sensational, and "China will overtake the USA soon in X years!" is much more so than milder projections like "USA should remain top for the next two decades".

[seanD]

China overtakes the US:

http://www.businessinsider.com/china...conomy-2014-10

But the danger for the US is not so much a single country becoming the new predominant economic power on the global horizon in place of the US, so the thread is focusing on the wrong issue. US will... and is... killing it's own economy with it's monetary policies (as per central bank activities, which is creating illusionary wealth bubbles that also give some the impression that we're presently in a economic recovery since 2008).*

As a result of this monetary policy, countries are moving away from a single economic hegemony (i.e. the dollar as a reserve currency) and more towards a collaborative economic outlook, hence, the growing trade and currency deals between the Bric countries.

*As a side note, the only reason the dollar is gaining strength now is because the other economic titanics of the world, such as Japan and EU, are also killing their economies with their own disastrous monetary policies, which has sparked a currency war, or, "race to the bottom" -- meaning all these economic powers are intentionally trying to kill their currencies. So it's not so much that the dollar looks strong, but that it looks the less weak in the global economic picture... but that's a whole different subject.