U.S. economic supremacy to end in 2016

“The forecast is for profound change in the balance of power, not least because in the era of America, the global economy was led by a democratic power. China is not that.”

China’s economy will outstrip America’s in five years

The U.S. was responsible for a quarter of global output in 1986. Now its share is less than 20%, and it is expected to drop to 17.8% by 2016, while China’s global output will rise to 18%.

See the link below for a hint of the attitudes we could run into: – JG.

Haaretz: April 26th, 2011

Some westerners have faced the possibility with trepidation, and now the International Monetary Fund has given the fears a date: The Chinese economy will surpass the U.S. economy within five years, it predicts.

It is not news that the Chinese economy is on track to outflank America’s. The news is that it will be happening so soon. The IMF, an organization of 187 countries, has set a date for the end of the era of U.S. supremacy over the global economy: 2016.

Most economists had thought it would happen much later, at least 10 years from now if not in a few more decades.

That is, the Chinese economy will become the biggest in the world in terms of purchasing power parity in 2016, the IMF suggests in its latest update, available online in an April 15 report titled “Global Economic Prospects and Policy Challenges.”

The comparison of purchasing power parity compares what Chinese and American residents earn and spend, in real terms.

The report follows a meeting of the G-20 finance ministers and central bank governors, and never mentions a comparison of the U.S. or Chinese economies by name.

What it compares is China’s and America’s real economic output in terms of purchasing-power parity. The organization predicts that the Chinese economy will expand to $19 trillion in 2016, compared with $11.2 trillion today.

Meanwhile, it predicts that the American real economic output will increase to $18.8 trillion in 2016, versus the current $15.2 trillion.

China’s share of the world’s gross domestic product will increase to 18% in five years, while America’s share will contract to 17.7%, the IMF projects.

It must be said that Chinese economic growth has been extraordinarily fast in recent years. The central government began to consider instituting – gradually – structural reforms in 1978, after acknowledging that Chairman Mao’s version of centrally planned economics had failed to produce growth. Not that the Party meant to abandon communism: the aim was simply to scale back central planning, gradually allowing management more autonomy.

Back then, at the start of the 1980s, the IMF estimated that America’s real economic output was 10 times greater than that of the Republic of China.

A decade ago China outstripped Japan, which was suffering the throes of economic crisis, and became the second-biggest economy in the world. However, the U.S. real economic output remained three times larger than China’s.

Since then, China’s share of the global economic output has doubled, while America’s has shrunk.

The U.S. was responsible for a quarter of global output in 1986. Now its share is less than 20%, and it is expected to drop to 17.8% by 2016.

The IMF predicts that by 2016, China’s real economic output for two weeks will be greater than it was for a whole year when the economic crisis reforms began.

Of course, prediction is a fool’s game and economic systems, like biological systems, are especially hard to predict because of the sheer magnitude of parameters.

China’s economy could outstrip America’s earlier than the IMF predicts, or it may not wind up doing so at all. There’s no telling. Just yesterday China’s People’s Daily Online ran an article headlined “Chinese path – a marvel of the world’s economic growth,” but some say Chinese economic growth may slow from the 10% annual pace it has maintained since the economic reforms began.

And if it doesn’t? The forecast is for profound change in the balance of power, not least because in the era of America, the global economy was led by a democratic power. China is not that.

See original here.

Read “Zambia: Chinese managers arrested for shooting protesting mineworkers” (October 25th, 2010) here.

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