China Just Overtook The US As The World's Largest Economy

[Saeed]

Sorry, America. China just overtook the US to become the world's largest economy, according to the International Monetary Fund.
Chris Giles at the Financial Times flagged up the change. He also alerted us in April that it was all about to happen.

Basically, the method used by the IMF adjusts for purchasing power parity, explained here.

The simple logic is that prices aren't the same in each country: A shirt will cost you less in Shanghai than in San Francisco, so it's not entirely reasonable to compare countries without taking this into account. Though a typical person in China earns a lot less than the typical person in the US, simply converting a Chinese salary into dollars underestimates how much purchasing power that individual, and therefore that country, might have. The Economist's Big Mac Index is a great example of these disparities.

So the IMF measures both GDP in market-exchange terms and in terms of purchasing power. On the purchasing-power basis, China is overtaking the US right about now and becoming the world's biggest economy.

We've just gone past that crossover on the chart below, according to the IMF. By the end of 2014, China will make up 16.48% of the world's purchasing-power adjusted GDP (or $17.632 trillion), and the US will make up just 16.28% (or $17.416 trillion):
It's not all sour news for the US. It'll be some time yet until the lines cross over in raw terms, not adjusted for purchasing power. By that measure, China still sits more than $6.5 trillion lower than the US and isn't likely to overtake for quite some time:

Read more: http://www.businessinsider.com/china-overtakes-us-as-worlds-largest-economy-2014-10#ixzz3FbaRRqrL

So is it a good news for Pakistan since China is one close ally of Pakistan?

 

[Badsha]

China wont take over U.S for the foreseeable future.

 

[blinding light]

Not an economics person, so don't understand the methodology explained here, but it was pretty predictable.

South/Central Asia will consolidate itself as a major power player in the coming years.

An interesting time to live in, indeed.

 

[akheR]

Economic prosperity is just the beginning : when there'll be concentration of wealth in the major urban centres (a strong middle-upper class base), we'll then witness transfer of knowledge - thus power - and then only the genuine rebirth of Asia, but it's indicated by the GDP/capita than nominal GDP, and it will definitely take few decades.
It's definitely good for Pakistan in the sense it can play a seminal role in reviving the Silk road - that can literally bring revolution to Pakistan's economy as much as society - but then expect the US to remain in Afghanistan and fuel Baloch nationalism around the Gwadar port, two factors which diminish the possibility of a new Silk road.

The US will do all it can to fight the rise of the dragon : the horrendous current scripts being played in the world are all here to slow down the emerging new poles of powers, whether it's the civil war in Ukraine against Russia or in Iraq and Syria against Iran (both China's allies), and it's not unexpected that "Islamists" will, in the near future, do their Jihad Joe in China.

Though China (contrarily to India but also the Arab world if there weren't Western leeches sucking its blood) doesn't have the demography to sustain it for long, and will implode around 2080.

 

[Gabbar Singh]

The graphic below is from an Economist article on this very topic. Thought it was interesting - China is reclaiming a position it has held in the past.



GDP/GDP at PPP etc is of course not the be all and end all because just like 'the West' China now has a lot of cheap and dangerous debt circulating. They will ultimately have to take measures to address that. How and when they do so will give us a good idea as to where China is headed in the next 20-30 years.

 

[Bewal Express]

The Chinese have a big cake but they also have a large population but the Americans also have a very big cake but only have to feed 20% of the people that China has to feed. This is called GDP per capita and Wikipedia puts Qatar at the top and China is ranked quite low. Interestingly Pakistan and India are by most estimates not too far apart.

 

[Buffet]

 

[Buffet]

Since one dollar will buy different things in different parts of the world, here is the latest ranking based on purchasing power.

 

[sweep_shot]

China's economy grew at its slowest pace since the early 1990s in the third quarter, official figures showed.

In the three months to September, the economy expanded 6% from a year earlier, falling just short of expectations for 6.1% growth.

The slowdown comes as China battles a raft of economic challenges including a damaging trade war with the US.

The government has moved to boost the economy with various measures including tax cuts.

The 6.1% year-on-year growth rate was the slowest pace of expansion since at least 1992, according to Reuters data.

The result is still within the government's target range for annual growth of between 6% to 6.5%.

The strength of the Chinese economy is closely watched as slowing growth can have far-reaching consequences for the global economy.

Earlier this year Beijing announced plans to boost spending and cut billions of dollars in taxes in an effort to support the economy.

It has also moved to provide a liquidity boost by reducing the amount of cash banks must hold in reserve.

Any analysis of China's economic data has to come with a caveat: Many economists believe the actual figures are much lower than what we are told, but it's the trajectory of growth and signalling from the government that you should pay attention to.

The fact that the growth figures have come in below market expectations indicate that China's economy is hurting more than many thought.

There were signs from China that these numbers were going to be worrying. Earlier this week, Premier Li Keqiang made the unusual move to warn local officials that they must do "everything" to make sure they hit growth targets for this year.

China's economy is being hit on three fronts: The US-led trade war, slowing demand at home and rising domestic challenges including the outbreak of swine fever that has dealt a huge blow to its pork farmers. It's also pushed up prices for consumers.

China's slowdown is nothing new. But these challenges pose new headaches for policymakers who are trying to manage the slowdown. The country's political stability depends on economic security - and over the last forty years, that's what the Communist Party has delivered. They're under pressure to keep that contract.

Source: https://www.bbc.com/news/business-50092788.

 

[Robert]

These graphics don’t show the EU as a single economy, as big as the USA and China.

 

[corneredtiger85292]

We are seeing the rise of one power and the demise of another..the world is going to be a very different place in a decades time..in many regards !

I for one, say good riddence to the big bully and trouble maker that is the U.S.A !

 

[WhenSultansBowled]

Trump isn't helping the USA's cause either.

The idiot should be kicked out of office asap.

IMHO, history has taught us that whoever has the power, eventually becomes the bully. Doesn't matter their race, religion or geographical location.

The Americans bully other peoples, Germans bullied, British Empire bullied, the Mongols bullied, the Muslims bullied, the Romans/Persians bullied etc etc.

Don't expect any less from our future Chinese overlords.

Ha!

 

[Bhaijaan]

Trump isn't helping the USA's cause either.

The idiot should be kicked out of office asap.

IMHO, history has taught us that whoever has the power, eventually becomes the bully. Doesn't matter their race, religion or geographical location.

The Americans bully other peoples, Germans bullied, British Empire bullied, the Mongols bullied, the Muslims bullied, the Romans/Persians bullied etc etc.

Don't expect any less from our future Chinese overlords.

Ha!

I assure you that Indians will not be bullies when we achieve super power status.

We will introduce concept of Sanatan Dharam to the world. Preach love and peace.

If Dragon comes in our path though we will not be hesitating to slay and present its head to Ma Kaali.

Jai Bhairo

 

[WhenSultansBowled]

I assure you that Indians will not be bullies when we achieve super power status.

We will introduce concept of Sanatan Dharam to the world. Preach love and peace.

If Dragon comes in our path though we will not be hesitating to slay and present its head to Ma Kaali.

Jai Bhairo

) I believe you my Indian friend

PS: Forgot to add "the Spanish" in my previous post. The way they slaughtered native Americans is the worst display of human nature.

 

[sweep_shot]

The US and China have reportedly agreed to roll back tariffs as part of any new trade deal.

The reports come amid rising hopes that the two countries will sign a pact that declares an end to a trade fight that has disrupted the global economy.

Officials have described the in-the-works agreement as a partial, "phase one" deal that is unlikely to fully address issues over technology theft that helped launch the fight.

No signing date has been settled.

The two sides had been expected to present a phase one deal at a gathering of world leaders in Chile before the end of the year, but the country cancelled two summits planned for the coming weeks after domestic protests.

China had been pressing the US to remove tariffs on its goods as part of any deal.

A spokesman for its Commerce Ministry said the two sides had agreed to cancel the tariffs "in stages" as the agreement develops.

On Thursday, Reuters and Bloomberg reported that a US trade official had confirmed that some tariffs would be lifted, should a deal be reached.

But US negotiators did not publicly endorse the report and Reuters later reported that the plan faces "fierce" internal opposition.

Stock markets gained on the reports, seeing them as a sign that a deal is getting closer.

Global growth
The US and China have imposed tariffs on each others' goods, worth billions of dollars worth of annual trade since last year.

The duties have hurt trade, acting as a drag on the economies of both countries and putting pressure on their leaders to strike an agreement.

The International Monetary Fund estimates that the US-China trade war will shave almost a percentage point off of global growth this year.

Source: https://www.bbc.com/news/business-50340037.

 

[mustang]

Trump isn't helping the USA's cause either.

The idiot should be kicked out of office asap.

IMHO, history has taught us that whoever has the power, eventually becomes the bully. Doesn't matter their race, religion or geographical location.

The Americans bully other peoples, Germans bullied, British Empire bullied, the Mongols bullied, the Muslims bullied, the Romans/Persians bullied etc etc.

Don't expect any less from our future Chinese overlords.

Ha!

Fantastic point! Something I have tried to emphasize across multiple threads here.

 

[PakLFC]

Big news if it's true. In terms of influence China is an also ran no way near the Americans.

 

[sweep_shot]

There are increasing hopes in Washington and Beijing that an agreement to help resolve the US-China trade war could soon be in sight. But this is a rivalry between two superpowers that is about much more than just trade, it is one that spans economics, defence, culture and technology.

So what does the United States want from China - and what is the US endgame?

The short answer is the phase-one trade deal that President Trump and the Chinese Vice-Premier Liu He shook hands on in the Oval office last month. But tensions between the two countries go far deeper than just trade, and no one I've spoken to in Washington thinks that this outline deal will make much difference on its own.

There has been a pronounced negative shift in attitudes to China in the US in recent years, and it's important to realise that this shift predates Mr Trump's arrival in the White House.

"I think if you'd seen a Hillary Clinton presidency, or another Democrat or another Republican in 2016, you would have seen this sharp turn," says Daniel Kliman, a former senior adviser at the US defence department.

"There was a sense that our approach to China wasn't working," says Dr Kliman, now director of the Asia-Pacific Security Program at the Center for a New American Security (CNAS).

There are many reasons for this rise in tensions. The promised economic benefits of China joining the World Trade Organisation in 2001 never materialised, says Ray Bowen, who worked for the US government as an economic analyst from 2001 until 2018.

China never intended to play by the rules, he says. "It's more the case that China intended to join multilateral fora in order to begin to shift how multinational fora regulate global trade." In other words, China joined intending to change rather than be changed.

The result was a vast wave of job losses and factory closures in the US known as the "China shock". The so-called "rust belt states" that voted for President Trump in 2016 bore the brunt.

Many US companies moved production to China to take advantage of lower labour costs. However, according to Daniel Kliman there was a high price for companies moving to China: "China has forced them to hand over their technology, their intellectual property," he says.

And, even those companies that didn't relocate production found that China somehow got hold of their trade secrets. Law enforcement agencies in the US have a long list of charges against Chinese individuals and companies for spying and computer hacking.

The FBI's director, Christopher Wray, recently told US Congress that there are currently at least 1,000 current investigations into the theft of intellectual property from American firms that lead back to China.

The US government has estimated that the total value of intellectual property stolen by China in the four years to 2017 alone to be $1.2tn (£936bn).

According to Dean Cheng of the Heritage Foundation, a US conservative think tank, this is the primary reason relations between the US and China have soured.

"When companies are finding out that their patents are being rifled through, when their product is being reverse engineered, when their R&D processes are being hijacked, more and more companies concluded that partnering with China was not turning out to be profitable, and could actually be downright negative," he says.

From inside government, economic analyst Ray Bowen says he noticed the mood change in late 2015. People who had previously advocated engagement with China were now alarmed to see how fast China was catching up.

At the same time in the Pentagon, Brig Gen Robert Spalding was leading a team of people trying to formulate a new national security strategy to deal with China's rise and influence. He has since left the military, and has written a book called "Stealth War, How China Took Over While America's Elite Slept".

When asked about the threat that China poses to US interests, Gen Spalding's reply is stark. "It's the most consequential existential threat since the Nazi party in World War Two.

"I think it's a far greater threat than the Soviet Union ever was. As the number two economy in the world, its reach, particularly into the governments and in all the institutions of the West, far exceeds what the Soviets could ever manage."

The result of Gen Spalding's work at the Pentagon was the National Security Strategy, published in December 2017. It's regarded as the lead document within government, designed to guide every department, and represents a profound shift in approach according to Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies.

"There has now been a movement away from the war on terror, and instead, competition among major powers has taken the place of terrorism as the major threat to the United States," she says.

The US defence department now believes that addressing the rise of China is one of the major military objectives of the United States in the coming decades. The speed with which China built, and then militarised, a string of artificial islands in the South China Sea in defiance of international law has alarmed many in Washington.

According to Dean Cheng, $5.3tn of trade passes through the area every year. "China's actions were in a sense an attempt to be able to cut the carotid artery of global trade," he says.

China has been very clear in its ambitions to lead the world in the important technologies of the future, like robotics and AI. "This is very core to the competition now," says Bonnie Glaser, "because if China were to succeed in these areas, then it probably would supplant the United States as the leading power in the world."

That is what is now at stake. America's military supremacy is based not on a huge standing army, but on high-tech weapons systems. If China takes the lead in these crucial technologies, then the US may not be able to keep up for long.

Daniel Kliman believes that the non-military technological race is also crucial. "Not only is China perfecting technologies for surveillance and censorship at home, but increasingly exporting these technologies as well as finance and knowhow abroad."

He believes the battle with what he calls "high tech authoritarianism" is one that will become more and more central to the conversation about China.

So, don't expect the US position on China to change in the near term, even if President Trump loses the coming election. The mood in Washington has changed.

The only real political conversation is not about whether to take on China but how best to do it. Many Democrats prefer engaging with allies against President Trump's unilateral approach. However, most Democrats know there are few votes to be had by advocating a softer China policy.

Source: https://www.bbc.com/news/business-50334297.

 

[sweep_shot]

Some US tariffs on China are likely to remain in place even in the event of a trade deal, the US has indicated.

US President Donald Trump told reporters that China was pushing for the removal of some tariffs as part of an agreement, but he said a "complete rollback" was off the table.

"They'd like to have a rollback... not a complete rollback because they know I won't do it," he said.

The two sides are trying to de-escalate the economically damaging trade war.

Negotiations have dragged on, despite Mr Trump's saying last month that the two sides had reached consensus on terms for a limited "phase one" agreement that could be signed within weeks.

Further complicating the talks, Chile recently cancelled plans to host two gatherings of world leaders. Those summits had been identified as possible venues for Mr Trump and Chinese President Xi Jinping to sign a pact.

On Friday, Mr Trump said that he wanted a deal, "assuming we get it", to be signed in the US.

Global growth
Mr Trump's remarks followed claims by officials in both the US and China that the countries would remove some tariffs, should a deal be reached.

A spokesman for China's Commerce Ministry said the two sides had agreed to cancel the tariffs "in stages".

Reuters and Bloomberg reported that a US trade official had confirmed that tariffs would be lifted, should a deal be reached.

But US negotiators did not publicly endorse the report and Reuters later reported that the plan faced "fierce" internal opposition.

Economic strains caused by the trade war have weighed on global growth this year, after the US and China imposed tariffs on billions of dollars worth of each others' goods.

The International Monetary Fund estimates that the US-China trade war will shave almost a percentage point off global growth in 2019.

In the US, the fight has particularly hit farmers, an important political constituency for Mr Trump.

On Friday, Mr Trump, who is up for re-election next year, denied that he felt pressure to strike a deal.

"China would like to make a deal much more than I would," he said.

Source: https://www.bbc.com/news/business-50351831.