the end is nigh: 2016 dollars, bigger, China, point, still

sharksfan

The Age Of America Will End In 2016 When China Blows Past Us — IMF

http://finance.yahoo.com/blogs/daily-ticker/age-america-end-2016-china-blows-past-us-154221921.html%20?sec=topStories&pos=main&asset=&ccode=

[China's economy will be bigger than the U.S. economy by 2016, says the IMF, using a special measure of economic size called "purchasing price parity."]

Measured in dollars, the U.S. GDP will still be 70% bigger than China's by then, but the trend is unmistakable: At some point, barring a wreck of China's economic freight train, China will eclipse the U.S. to become the largest economy in the world.

What will this mean?

Well, psychologically, it will mean that Americans will have to get used to the idea that they're not the biggest kid on the block anymore. For most participants in the global economy, China will have become the most important trading partner and market, and China's economic policies, not America's, will dominate the global conversation.

Similarly, and perhaps more momentously, China's military will eventually be larger than the U.S.'s, which will mean the U.S. will no longer be the most powerful country in the world. It's easier to have influence over other countries when you can speak softly and carry a big stick. Once China vaults past the US economically, it will have the wherewithal to carry an even bigger stick--unless the US wants to continue to bankrupt itself by outspending everyone else despite its smaller GDP.

Adding to the change in fortunes is the fact that America's financial situation is vastly weaker than China's: We have a huge deficit and massive debts; China, meanwhile, funds our consumption (by lending us money) and runs a surplus. Over the next couple of decades, therefore, much of the US resources that might have gone into growth and infrastructure spending, will be used instead on interest payments, budget cuts, and social programs. This will likely make the US feel poorer, especially relative to the explosive growth in China.

Regardless of when the exact date comes, in other words, we're headed for a new world order--one in which China, not America, will be the center of the world.

Analti_Calte

So what? From a living standard standpoint, US will still beat China for years to come.

US passed UK more than 100 yrs ago, UK still one of the most developed country in the world.

Since we are on China, my co-worker told me a funny Chinese saying - the slimmest camel is larger than a horse.

economicz

i don't think it really matters, but i like that they set a date after 2012...

Unforseen

^ The military point isn't quite true.

China still has barely begun to develop infrastructure through it's western regions and just last year had an 11 day traffic jam in the east. I've toured the eastern main land and while progress has been incredible, there's still much to go. Factor in that a booming middle class means more and more infrastructure developments being required and other government support programs.

This is all relevant because a slightly larger GDP in a nation with 3-4 times as many people as the US in the midst of major infrastructure development means very little discretionary capital, which means defense spending will still lag. If i remember correctly, roughly ten nations have aircraft carriers, China is still years away from having a deploy-able carrier and no one besides the US (11) has more than 2 (in service). Not to mention that US carriers are typically at least 1/3 larger than that of their competitors. Heck, the US has decommissioned 55 carriers in it's history versus the 1 China has yet to construct. These things are massive, massive undertakings to construct and support. Currently US DoD spending is roughly 40% of the world's and six times that of China. Factor in that this gap has existed at a larger degree for decades, not to mention military experience and our possession of most high end software firms and you have a major learning curve to overcome.

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"Without American production the United Nations could never have won the war."
-Joseph Stalin, Tehran Conference: 1943

onelife1

I'm still not sure how this will necessarily hurt the US. It's not like China is going to march troops over here just because they have a bigger army. In fact, maybe not being the biggest dog might mean that the US will no longer be pressured into expensive international conflicts where it has no business.

Not being the biggest economy probably doesn't matter either. It's not like all the other countries will say "Sorry US, we will only trade with the biggest economy, China. We are not going to trade with you because you are only second biggest in the world". In fact, having a huge buyer of iPods, Nike shoes and GM cars might even help in the future.

Other stuff, like the US fiscal deficit, has nothing to do with the ordinal ranking of economies by size.

LorrinCFA

^ Agreed

As Chinese middle class grows they'll lose wage competitiveness and demand for US goods will increase, so I'd expect it to be possibly beneficial for US growth.

People keep confusing total GDP with GDP per capita. There's definitely a balance between the two. Uniting all of Africa into one extremely large, poor nation is not going to make it more powerful than a European nation with a similarly sized GDP spread over a much smaller population.

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"Without American production the United Nations could never have won the war."
-Joseph Stalin, Tehran Conference: 1943

adehbone

I guess the point I'm making is that having a rich neighbor is usually a positive thing. Canada, for instance, benefits tremendously from being next to the US. Similarly, a rich China might benefit the US, even if they are farther away.

hassan

^ Oh my.
I should create a cult.

RMontgomery

Fair point, I was merely stating that China finally matching our GDP does not equate to military domination and the end of the US as we know it. The situation you're describing already exists with Germany, Russia, the UK, Japan and China for that matter. I mean a showdown with any of those would essentially result in mutual annihlation, which is never good for anyone. So, basically, China matching the US in GDP is not some magical light switch that transforms the world overnight. Honestly, when other US citizens get alarmed about some perceived loss of absolute superiority (that likely never have existed in reality) I just point to the UK and France and say they seem to be enjoying life just fine, and they were once dominant superpowers themselves.

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"Without American production the United Nations could never have won the war."
-Joseph Stalin, Tehran Conference: 1943



Edited 1 time(s). Last edit at Wednesday, April 27, 2011 at 03:58AM by Black Swan.

svgleeson

Excellent point about GDP vs GDP/capital. While China may become a bigger economy as a whole it will take a lot longer for an average Chinese person's propensity to spend coming close to the level of a US consumer.

Black Swan Wrote:
-------------------------------------------------------
> ^ Agreed
>
> As Chinese middle class grows they'll lose wage
> competitiveness and demand for US goods will
> increase, so I'd expect it to be possibly
> beneficial for US growth.
>
> People keep confusing total GDP with GDP per
> capita. There's definitely a balance between the
> two. Uniting all of Africa into one extremely
> large, poor nation is not going to make it more
> powerful than a European nation with a similarly
> sized GDP spread over a much smaller population.