| ETA for China's economy becoming #1??? | |
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| May 2, 2008 16:46 |   |
 | A different economic theory predicts 2015.... (Fortune Magazine) -- Back in 2001 when the International Olympic Committee chose Beijing as the site of this summer's games, the event was meant to mark China's debut as a player on the global economic stage. But a recent study by the economist Angus Maddison projects that China will become the world's dominant economic superpower much sooner than expected - not in 2050, but in 2015. Read the complete story here: http://money.cnn.com/ Please post if the link does not work & I will post the complete story. |
| May 3, 2008 23:18 | #1 |
| Griz, the link didn't work and I couldn't find that article. Personally, I don't think that China will become the world's dominant role in 2015. I am wondering what made Angus Maddison make his prediction. |
| May 7, 2008 12:31 | #2 |
| Here you go, JimmyB: You have 7 years to learn Mandarin Forget cheap imports. China's rise will soon be a force on Wall Street and Main Street and in Silicon Valley. By Geoff Colvin, senior editor at large (Fortune Magazine) -- Back in 2001 when the International Olympic Committee chose Beijing as the site of this summer's games, the event was meant to mark China's debut as a player on the global economic stage. But a recent study by the economist Angus Maddison projects that China will become the world's dominant economic superpower much sooner than expected - not in 2050, but in 2015. While short-term investors are already cashing in on China's growth by playing the global commodities boom, smart long-term thinkers are contemplating what happens when China matures from an exporter of cheap goods to a competitor in sectors where the U.S. is dominant - technology, brand building, finance. China has almost wiped U.S. makers of low-value items like toys and socks, but by 2015 it may threaten Apple (AAPL, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and Procter & Gamble (PG, Fortune 500). It will increasingly influence the S&P 500 and the mutual funds in our 401(k)s. So it's worth looking at how that will happen, what it means, and what anyone can do in the seven years before the baton is passed. Just using the exchange rate to convert China's GDP into dollars isn't helpful in comparing the two economies, because China controls its exchange rate; by that method, China's economy might not pass America's for decades. Exchange rates apply only to tradable products and services; they aren't very useful in valuing nontradable goods in a country like China that is much poorer than the United States. So we need some way to compare the real value of China's economic output with America's, and economists have developed one. It is called purchasing power parity. |
| May 7, 2008 12:32 | #3 |
| For example, Chinese construction workers earn a whole lot less than Americans do, yet they can still build top-quality buildings. If we used the exchange rate, the value of a new skyscraper in Shanghai would count much less toward China's GDP than an identical building in Chicago would count toward America's, which makes no sense. Purchasing power parity corrects the problem. Will China take the crown? Angus Maddison's forecast (which uses purchasing power parity) isn't built on outlandish assumptions. He assumes China's growth will slow way down year by year, and America's will average about 2.6% annually, which seems reasonable. But because China has grown so stupendously during the past decade, it should still be able to take the crown in just seven more years. If that happens, America will close out a 125-year run as the No. 1 economy. We assumed the title in 1890 from - guess who. Britain? France? No. The world's largest economy until 1890 was China's. That's why Maddison says he expects China to "resume its natural role as the world's largest economy by 2015." That scenario makes sense. China was the largest economy for centuries because everyone had the same type of economy - subsistence - and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs. So how should we make the most of our seven-year grace period? For companies: Focus on getting better at your highest-value activities. Just because the Chinese will be fighting you in the same industries doesn't mean you'll lose. (Investors, remember that China bought $3 billion of Blackstone (BX) at the IPO price of $31 last summer, and the firm is now trading at $19.) It only means you'll have to work harder to win. |
| May 7, 2008 12:33 | #4 |
| For individuals: You can avoid competition with Chinese workers by doing place-based work, which ranges in value from highly skilled (emergency-room surgery) to menial (pouring concrete). But the many people who do information-based work, which is most subject to competition, will have to get dramatically better to be worth what they cost. For government leaders: Improve U.S. education above all. Those are the issues in China's becoming No. 1 that we most need to focus on. And as with so much else in China's recent history, we'll need to worry about them much sooner than we expected. |
| May 7, 2008 21:57 | #5 |
| "If that happens, America will close out a 125-year run as the No. 1 economy." It seems that US is afraid that China will take the crown in 2015 and it won't let this happen. However, no country can be the leader of the whole world forever. Now that China becomes the No.1 economy in 2015, some other countries will surpass China one day. As a Chinese, I don't care if it is the No.1 economy in the word. What I care about is that if its people can live more happily. This is the most important. |
| May 8, 2008 09:32 | #6 |
| who cares #1, as one member of general public, we cares average well-beings. The thing is in overseas, especially in US ,CANADA, the info. tech, soft tech even in fin/acct area, firerce competitions are among chinese themselves! ie, i have 5 chinese friends, all their children learning in IT in waterloo uni. |
| May 8, 2008 10:45 | #7 |
| It would be nice if all of the people at the top...the politicians, corporate leaders and investors would play nice. However, I think they all have a very strong competitive spirit - being #1 means something to them. They are not common people like us. |
| May 8, 2008 21:05 | #8 |
| Have a look at the Nordic countries. Although they are not No.1 economy in the world, people there live happily and contently. |
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