China’s economy is catching up to the U.S.’s much more quickly than anticipated. That’s according to a new report from the International Comparison Program of the World Bank.
The study recalibrates GDP statistics based on updated estimates of “purchasing-power parity” — a measure of what money can actually buy in different economies. In the process, the economy of China comes out far larger than we had previously thought. Its GDP surges to $13.5 trillion in 2011 (the latest year available), compared with the $7.3 trillion calculated using exchange rates. That catapults China’s economy much closer to that of the U.S. — at $15.5 trillion. Forecasting ahead, these figures show that China could overtake America as the world’s largest economy as early as this year.
Even if China does become No. 1, that would just be a mask covering up the reality of the economy’s weaknesses. Some of the factors that have been driving GDP upward are also signs of China’s deteriorating economic health — investment in excess capacity, the construction of wasteful real estate projects and the buildup of crazy levels of debt. China is losing its cost competitiveness but still lags badly in the managerial expertise, technology and financial professionalism necessary to develop a truly advanced economy.
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On the flip side, if the U.S. slips from its No. 1 position, it doesn’t spell doom. The U.S. still has a substantial lead in innovation, and its dominant position in many industries and sectors is not about to vanish. New York City will remain the world’s premier financial center, and the dollar will reign supreme on the world stage for some time to come. Still, wherever the U.S. ranks, its economy too is badly in need of reform. Better infrastructure, a smarter tax code, an improved education system and more determined efforts to close the income gap would also strengthen the economy’s foundation for growth.
The US should pour in its wealth to help its own people instead of wasting their money in countries like the Philippines(and other countries). Signing that military pact with that country is a mistake. They kicked us out a decade ago and now wants us back? What an ingrate group of people!
the new '21'