logo
  Join        Login             Stock Quote

When Will China Be Larger Than The U.S. Economy?

 January 07, 2010 09:14 PM


I got this question twice this week, once from an interest reader and once after a speech.  I expect China's economy to be larger than ours within the next decade, most likely around 2018.  Here's a picture of the two economies:

China Data notes: These are low-fidelity data.  The U.S. GDP figures are decent, projected out at our historic average growth rate.  Actual data end in 2008, so the 2009 low figures are not incorporated.  Chinese GDP data are of low quality, but roughly indicative of the trend.  They were also projected out using the historic growth rate.  Converting the Chinese data into figures comparable to U.S. dollars is tough.  This conversion was done with an estimate of purchasing power parity, but consider it only a w.a.g.

[Related -Gold Slides On Perfect Storm For Dollar]

At some point China's economic growth rate will slow down, but only after their per capita production rises to that of advanced economies.  That's still quite some ways away.  The the strong China economy in 2020 will continue reflect low per capita income, but lots of capitas.

But what's it mean for the United States?  Some folks like to swagger and say "We're Number One," and they wont' be able to say that in a decade.  However, economics is not like a game, in which there's a winner and a loser.  We can all be winners.  In fact, engage in the following thought experiment.  Would you be better off

  • making $40,000 a year in a neighborhood where everyone else makes $30,000, or
  • making $50,000 a year in a neighborhood where everyone else makes $60,000?

[Related -Forward Guidance Now A Nightmare For Fed.]

If you are focused on envy and keeping up with the Jones, the first choice is for you.

If, instead, you are focused on income as a means of enjoying life, then you prefer the second choice.  If you care about your fellow man, you prefer the second choice.  If you think that social problems spill over from low-income households to their neighbors, then you prefer the second choice.

I certainly would rather live in a rich neighborhood, even if I cannot keep up with the Joneses.  (Right now my neighbors wonder how I keep such old cars running, while they buy new BMWs and Mercedes, so I'm comfortable not being Number One.

Back to reality.  A richer China will increase demand for American-made goods and services.  Right now China is the third largest buyer of American exports (after Canada and Mexico).  We export all sorts of stuff to China: consumer goods, capital goods, food, industrial commodities.  Detail here.

Business planning idea:  China will increasingly be a market, not just a production location.

iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageGold Slides On Perfect Storm For Dollar

For all the anticipation surrounding the delivery of the Fed’s statement in the run-up to the September read on...

article imageForward Guidance Now A Nightmare For Fed.

Janet Yellen is probably sorry Ben Bernanke ever embarked on his program of the Fed providing read on...

article imageThis Once-Broken Social Media Stock Is Back On The Warpath

In the brief history of social media stocks, history is repeating itself. Both Facebook (NASDAQ: FB) and read on...

article imageItalian Workers Were Too Productive For 20 Years

The 2008 crisis has resulted in significant downward revisions of potential growth for most advanced read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Apple Refresh Not so Refreshing
More Articles on: Finance , China , Economics Data



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.