The world can anticipate China’s GDP (gross domestic product) would eventually surpass the United States to become the world’s largest, but don’t expect it to occur anytime soon.
As of the end of 2016, US GDP stood at $US18.56 trillion and China GDP - $US11.19 trillion. Japan is ranked 3
rd
, but with just $US4.93 trillion. Hence, the gaps between the US, China and Japan are huge and it could take at least a decade before China rises to the top.
The US has also witnessed a significant upturn in its economy, compared to recent years, while Japan continues to witness slow GDP annual growth rates, averaging 1-2 percent a year, while China is on pace to see a 6.9 growth rate by the end of the year.
The US 3 percent annual growth rate pattern for 2017 does not seem spectacular, but next year the US could have 4-5 percent growth rates and that’s significant considering the size of its economy.
Let’s do some simple calculations to demonstrate the huge GDP gap between the US and China. With just 3 percent GDP growth in the US that accounts for an added, $556.8bn in total GDP and if the US has 4 percent growth next year, you add another $US760bn into the account and if two years later, it’s 5 percent growth that would make another $US1 trillion added.
And now let’s calculate China GDP figures and assume the country enjoys a 6.9 percent annual growth rate for this year. That amounts to $US772.1bn and if the growth rate stays the same for the next two years, you only add another $US1.7 trillion.
Nevertheless, President Trump will not remain in the White House forever and he’s limited to two terms, until Jan. 2025 (if he is re-elected into a second term). And historically, when one ruling party stays in power in the US for 8 years then the opposition party routinely takes over and in this instance it would the Democrat Party.
When Democrats are in power, the US often witnesses a slowdown in economic growth rates, due to higher taxes and more spending on social services. Here’s where China can start catching up with the US to surpass them on global GDP rankings.
Meanwhile, former White House strategy advisor Steve Bannon, has introduced a new debate on the US vs. China economic models and argues that if pro-growth and nationalist politicians, such as Trump, stay in power in Washington for the next 30 years, then the US will be unstoppable as a global economic driver and China will have to settle for second-best.
But Bannon also realizes that Beijing’s economic model for China is “brilliant” as well. Nonetheless, he insists the US economic model is better.
According to Wei Du, a correspondent at Channel News Asia, Bannon also said: “Chinese way of running their economic system is quite brilliant. I tip my hat to them… there isn’t a world leader Trump respects more than the president of China. ”
Well, China has succeeded in opening up and reforms in the past few decades that have encourage a more free market system in the nation, along with support for an entrepreneurial spirit that favors hi-tech innovative developers.
Beijing, under the helm of Chinese President Xi Jinping also endorses a good business climate that promotes lower taxes and a supply-side economics structure.
Xi has delivered speeches discussing “inclusive growth” and wants China to pursue greater cooperation on cross-border trade investments with the international community.
China’s Belt & Road Initiative is expected to construct major infrastructure projects in Asia, Africa, Middle East and Europe. We can learn more about it here.
In other words, China’s rapid economic development and remarkable GDP annual growth rates should not be viewed in a prism of negativity, but we should take a closer look at the benefits of China’s rise and see the true value in it for ourselves.
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Twitter: @tmcgregorchina
Greg Blandino
works at Beijing, China
12w ago
Maybe. Third-order growth is slowing in China and maintaining or growing in the US. (In 2007 China’s GDP growth was 14.2% and the US’s was 1.8%, in 2017 the US is on track for 3% growth and China is on track for 7% growth. Basically China’s “growth of growth” has halved while the US’s has basically settled and has recovered from the Lost Decade after 2007 subprime crash. Nominally speaking China’s growth is more than the US’s growth but it is starting from a lower baseline and has more “low-hanging fruit” to pick.
Demographically both countries are going to have a rough couple of decades ahead but China’s demographic problems are going to be worse than the US’s while the US will continue to be an attractive destination for immigration. On the other hand China is still disproportionately rural, and pulling people off the farm and putting them in the city is a sure-fire way to pump up your growth.
Anyways, basing your prediction off of current trends is a bit rough: if the US’s growth picks up to say ’90s levels and China’s continues to decline, maybe never. If the US economy crashes tomorrow, maybe next year. It also might be that China’s economy passes the US and then the US passes China’s later. In the long-long-term the US can probably handle to double it’s population comfortably within it’s current borders; China can’t. On the other hand, in the long-long-term China’s productivity will likely start to approach western levels.
Alphons Ranner
Member of the Board at Hoogheemraadschap Delfland (2009-present)
22w ago
I take it that the time horizon is limited to say 5 years. If the economic growth of the last ten years is continued it might be possible that China would be the worlds largest economy. However there are some factors that could prevent this. The first is that one or another country like the US is able to carry out a fast growth policy. E.g the US administration is taken away the existing measures to reduce climate effects and has a protectionist trade policy, all in order to regain a fast economic growth. The reality of this scenario however can be doubted .
The second reason is the structural position of China. Of late is has become evident that growth of Chinese enterprises have came at the costs of high debts. China is also confronted with the dangers of climate change. They use coal in massive amounts to obtain electricity and the emission of pollutants in cities is a major threat to the quality of living. Many measures have to be taken to solve these problems. It is likely that it will lead to a further reduction of the rate of economic growth. So I doubt that China will become the largest economy of the world in five years time.
Jed Roberts
20w ago
Very, very likely.
To recap the US is sitting at number 1 with 19 trillion USD, China at 2 has a nominal GDP of 11 trillion. However, by PPP GDP (GDP adjusted to the price level of each country) China actually exceeds the US by a hair’s width (17.6 t vs 17.4 t for the US).
Now, China is experiencing very fast economic growth, and there’s a good reason for that: China is still quite poor. China has a GDP per capita of $8.1 k, vs $57.5k in the US. Almost an order of magnitude difference. This is incredibly obvious if you look at West China, not just the super rich Shanghai and Shezhen areas.
These values are indicative of the fact that a lot of China’s populace are still really unproductive. You’ve got lots of people tilling tiny little fields that produce very little crop (vs a US farmer in their combine harvester), you’ve got factory workers performing easily automated operations by hand, etc. The reason is either a lack of capital (to buy automated assembly equipment, modern tractors, etc), education/experience and finally entrepreneurship (establishing companies, implementing new techniques, etc).
Now all of those factors are developing, education is improving, there’s more capital than ever, etc. This is why China grows so fast, it has been making really easy upgrades to its economy (like a rural farmer buying a motorcycle instead of carrying crops to market).
Unfortunately, China is starting to hit the end of easy gains. GDP growth has slowed down a lot in the last few years, although it’s still a fast growing economy. So this brings us back to the question, will China eclipse the US?
I say yes. Over the next few decades China will continue to improve the productivity of its more Eastern regions, while the coastal cities will see factory workers upskilled into more productive positions. Finally a more educated generation will grow up, more clever and innovative.
Terry Newman
Ten years living and doing business in China.
12w ago
In terms of GDP, almost certainly. In terms of GDP per capita, not so sure. China has a long way to go before it gets anywhere near most developed countries and there are many barriers to long-term growth.
I am reminded of an anecdote about a condemned man who offered his absolute monarch a bargain. He offered to teach the king’s favourite horse to talk in one year, whereupon the king would spare his life. The king agreed. The condemned man’s friend asked him why he would enter into such a crazy bargain. The condemned man’s response was that a lot can happen in a year. “The king could die, the horse could die, I could die, or the horse could learn to talk”.
A lot can happen between now and the time that the Chinese economy is projected to reach a GDP per capita approaching that of the US.
Rinat Abdekadir
I'm a Kazakh-Chinese who was born in Xinjiang.
12w ago
It’s very likely that China will become the world’s largest economy based on population.
Simply put, China’s population is about 4.25 times the population of the US. The US’s economy is already very mature and the US’s population is not increasing at a fast rate, therefore the high GDP growth rate that would be required to keep the US ahead of China is not going to be possible. China only has to have a GDP per Capita around 1/4 of the US. China’s GDP per capita is about 1/7 of the US’s, so the convergence is almost certain.
China’s GDP per Capita is probably not going to surpass the US anytime soon however, the US’s GDP per Capita is extremely high in comparison with its associated human capital, even mature countries like France or Germany don’t compare with the US in Per Capita GDP, the average US worker is one of the most productive workers in the entire world due to a combination of innovation, large amounts of natural resources as well as having the ability to attract skilled and intelligent immigrants from elsewhere.
Jerry Mc Kenna
I have voted in the US since 1972
12w ago
By some measures it is the world’s largest economy.
If we look at Purchasing Power Parity, China is on top. The graph below seems to have been made in 2013, but in the article that shows this graph there is a quote. “Both the IMF and the World Bank now rate China as the world’s largest economybased on Purchasing Power Parity (PPP), a measure that adjusts countries’ GDPs for differences in prices” (The world’s top economy: the US vs China in five charts )
In other ways of measuring it has a bit to go. In the same article the fact that China is still not a consumer society. The US is economically independent in part because it is a large country that for generations sold to itself. China by being tied to exports, is subject to the whims of people in other countries.
Jay Bazzinotti
studied at Framingham State University
22w ago
How do you define economy? If you look at strictly GDP then the Chinese should surpass the US any minute now. If you look at GDP per capita then there are other countries who will be far ahead of China for the foreseeable future.
It was always inevitable that China would become a massive economy based on its population alone. The issue isn’t necessarily one of economic activity, but one of consumption. How much can the world produce to satisfy another consumption economy like the US? It is very much like Daniel Day Lewis saying in the awful movie “There Will Be Blood”, “I drink your milkshake”. The problem is that with more people adding more straws the milkshake will be emptier sooner. It’s a race to the bottom.
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