China Surpasses US Economy
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It’s Official: America Is Now No. 2
Published: Dec 4, 2014, By Brett Arends
Chinese economy overtakes the U.S.’s to become the largest
Hang on to your hats, America.
And throw away that big, fat styrofoam finger while you’re about it.
There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.
It just happened — and almost nobody noticed.
The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.
As recently as 2000, we produced nearly three times as much as the Chinese.
To put the numbers slightly differently, China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S.
This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.
I reported on this looming development over two years ago, but the moment came sooner than I or anyone else had predicted. China’s recent decision to bring gross domestic product calculations in line with international standards has revealed activity that had previously gone uncounted.
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These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders.
Make no mistake. This is a geopolitical earthquake with a high reading on the Richter scale.
PPP is the real way of comparing economies. It is one reported by the IMF and was, for example, the one used by McKinsey & Co. consultants back in the 1990s when they undertook a study of economic productivity on behalf of the British government.
Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. But such measures, although they are widely followed, are largely meaningless. Does the U.S. economy really shrink if the dollar falls 10% on international currency markets? Does the recent plunge in the yen mean the Japanese economy is vanishing before our eyes?
Back in 2012, when I first reported on these figures, the IMF tried to challenge the importance of PPP. I was not surprised. It is not in anyone’s interest at the IMF that people in the Western world start focusing too much on the sheer extent of China’s power. But the PPP data come from the IMF, not from me. And it is noteworthy that when the IMF’s official World Economic Outlook compares countries by their share of world output, it does so using PPP.
Yes, all statistics are open to various quibbles. It is perfectly possible China’s latest numbers overstate output — or understate them. That may also be true of U.S. GDP figures. But the IMF data are the best we have.
Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.
This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.
Re: China Surpasses US Economy
Of the $17.6 trillion of Chinese GDP, about $16 trillion of it is low-quality crap that's not worth its price tag. Clothing, household products and electronics that fall apart in a year or so top the list.
Re: China Surpasses US Economy
The same things were said in the 1970's and 1980's about "Made in Japan" products but knowing what you know now about some very well made "Made in Japan" products, would you rather have a 1980's Chevy, Ford or Chrysler, or a 1980's Toyota?:ylwcar:
Quote:
Posted in reply to the post by BobHeisler:
Of the $17.6 trillion of Chinese GDP, about $16 trillion of it is low-quality crap that's not worth its price tag. Clothing, household products and electronics that fall apart in a year or so top the list.
Re: China Surpasses US Economy
Actually, I believe the derogatory remarks about Japanese products were more prevalent in the 60's. By the 1970's auto imports from Japan were way up and so was the quality.
Quote:
Posted in reply to the post by Hotspring 44:
The same things were said in the 1970's and 1980's about "Made in Japan" products but knowing what you know now about some very well made "Made in Japan" products, would you rather have a 1980's Chevy, Ford or Chrysler, or a 1980's Toyota?:ylwcar:
Re: China Surpasses US Economy
Your probably right about that for the most part but that sentiment in the 1970's and 1980's when I was coming of age regarding cars and auto mechanics tools for the general auto mechanic who had not invested in the metric tooling, nor were American drivers too appreciative of the smaller cars that were more prone to get more damage and more serious injuries to occupants in a collision than a heavier American automobile would have in same circumstance, particularly if it was with an American automobile.
That was a legitimate concern in those times but none the less the sentiment was something like "that cheap Japanese peace of crap!"... ...Even though the thing was rather well made comparably speaking to American made items of similar use/type (not limited to Automobiles though, just my main experience was with automobiles).
American technology did "bleed" away from America to Japan with Autos because of stubborn, greedy, and uncreative CEO's who did not listen to their workers or engineers enough which gave Japanese Auto makers the edge at a critical time in history.
Same has been happening with China only not just technology from America but other parts of the world too.
That being said, the facade of "Western Economics" being the only and best one is being chipped away bit by bit, none the less.
Quote:
Posted in reply to the post by BobHeisler:
Actually, I believe the derogatory remarks about Japanese products were more prevalent in the 60's. By the 1970's auto imports from Japan were way up and so was the quality.
Re: China Surpasses US Economy
I tried to do a little research but the terminology is challenging, to say the least. This is the list of different definitions (which I do not understand) regarding Gross Domestic Product or, "GDP." The following are six different national economic rankings. Each of the following references are live links, so you can click on them for more information and see how the US ranks against China:
It is really difficult to get a clear handle on tough economic concepts when there are so many and that are so confusing. Someone told me that PPP (purchasing power parity) is a better measuring tool for assessing a nation's economic growth, but there are no less than three kinds of PPP!
Can anyone give us a better idea of which definitions are better for analyzing and comparing the economies of different countries?
Quote:
Posted in reply to the post by BobHeisler:
Of the $17.6 trillion of Chinese GDP, about $16 trillion of it is low-quality crap that's not worth its price tag. Clothing, household products and electronics that fall apart in a year or so top the list.
