Next Big Future: Credit Crisis Updated Projection of When China's GDP passes the USA
Snake_Oil_Baron
· 1 year ago
Now, my knowledge of economics is far from extensive. And I would personally not be shocked if China did overtake America in GDP; it has such a huge population and plenty of resources. But I do feel that its economy is not quite as healthy as it appears. If assessments like the one in this book review by The Economist are correct, China has a lot of reform work to do and may even be backsliding. I would prefer to see China prosper since that would increase the power of her middle class and help move the nation towards liberty but currently I have some concerns about whether it is charting the right course.
nextbigfuture
· 1 year ago
China's economy does have weaknesses. The question is how weak relative to the USA and Europe. Recent events show that the US and European and (many other countries in the world) are weaker than was believed until this crisis. China is holding up better in this crisis. China can reduce from 6% interest rates instead of from 2% (for the US) and 3.5% for europe. China can switch from dampening growth to allowing it to continue, instead of all out efforts to prevent deep recession/depression. China has $2 trillion in reserves instead of having to up debt to over $10 trilllion. China has debt too but not as much. At the end of 2008, China's economy without Hong Kong and Macau is already almost $4 trillion. Not 2.8 trillion if the 2007 ratio of $12.4 trillion to 2.2 trillion was adjusted to $14.3 trillion to the same ratio times 1.1 for 10% better GDP growth.
The early pass or late pass question is what will the exchange rate be ? What is a fair value exchange rate ? Are the statistics for China's economy accurate ? Are they higher or lower ? I argue that the China's stats will adjust higher and the exchange rate will improve significantly for a relatively stronger chinese currency. I think China will choose to have a stronger currency. Some of this will be forced upon them because of the hot money issue.
If China manages a growth rate of 11% & the US of 3% then the differential is 8%. Under the rule of 72 (doubling can be achieved by 72 per centage points of growth compounded) that means 10 years. That makes all sorts of assumptions including exchange rates coming to reflect this & both parties keeping their present growth rates but it is a fair rule of thumb.Indeed with the present crunch it may be overly optimistic for the US.
nickmanila
· 1 year ago
USA gdp 1985 4.1 trillion Real Gdp growth rate 1985 to 2007 3.07% source bea.gov. China has the potential to grow by 7% for the next decade. Based on 7% annual growth by 2018 China would reach America's 2007 gdp level. The yuan would need to appreciate by an average 2.5% per annum. 6% gdp growth 2019 2020 would see China reach America's 2013 to 2014 gdp level.
All Comments
The early pass or late pass question is what will the exchange rate be ? What is a fair value exchange rate ? Are the statistics for China's economy accurate ? Are they higher or lower ? I argue that the China's stats will adjust higher and the exchange rate will improve significantly for a relatively stronger chinese currency. I think China will choose to have a stronger currency. Some of this will be forced upon them because of the hot money issue.
If China manages a growth rate of 11% & the US of 3% then the differential is 8%. Under the rule of 72 (doubling can be achieved by 72 per centage points of growth compounded) that means 10 years. That makes all sorts of assumptions including exchange rates coming to reflect this & both parties keeping their present growth rates but it is a fair rule of thumb.Indeed with the present crunch it may be overly optimistic for the US.
China has the potential to grow by 7% for the next decade.
Based on 7% annual growth by 2018 China would reach America's 2007 gdp level.
The yuan would need to appreciate by an average 2.5% per annum.
6% gdp growth 2019 2020 would see China reach America's 2013 to 2014 gdp level.