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China overtaking the US economy

  • 30-08-2009 2:12pm
    #1
    Anonymous1987
    Closed Accounts Posts: 784 ✭✭✭


    There is a lot of hype in the media about the Chinese economy overtaking the US by 2020 but I find this very hard to believe.

    The IMF calculates US GDP at $14.264 trillion and the Chinese economy at $4.401 as of 2008. For China even to reach the same level of the 2008 US economy it would take till at least 2045 assuming a very high growth rate of 10%. Having said that though factoring in an appreciating exchange rate would no doubt improve China's GDP figures but its seems a strech for it to surpass the US by 2020. Is it all really hype or are their facts behind it?


Comments

  • #2
    Économiste Monétaire
    Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    Well, maybe my maths is wrong here*, but a growth rate of 10% every year and the magic of compound interest means that Chinese GDP would be $12.557tn by 2020 (11 years of growth). Assuming 3% growth per year for the U.S. economy that gives $19.745tn. What about the figures adjusted for PPP? Those are usually used when citing the Chinese economy as the second largest in the world.

    *Very, very possible on Sundays.


  • #3
    Anonymous1987
    Closed Accounts Posts: 784 ✭✭✭Anonymous1987


    No you're maths is spot on made a mistake myself :o. Assuming a 3% growth rate in the US and 10% in China, the two economies should converge sometime around 2026 using nominal GDP at $24.284 trillion for the US and $24.469 for China however using PPP as you suggested China could match the US as early as 2017 with the US at $18.611 trillion and China at $18.666 :eek:. I guess the real question is how sustainable is China's growth rate?


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