
China will become the world's largest economy by the end of the year - JumpCrisscross
http://www.economist.com/blogs/graphicdetail/2014/04/daily-chart-19?fsrc=scn%2Ftw%2Fte%2Fpe%2Fed%2Fdailychartppp
======
mturmon
_" So China, which had been forecast to overtake America in 2019 by the IMF,
will be crowned the world's pre-eminent country by the end of this year
according to The Economist’s calculations. The American Century ends, and the
Pacific Century begins."_

You can expect the _Economist_ to tilt this way, but it feels a little over-
eager and glib to me (even considering the source). Yes, by one important
economic metric, China wins. So therefore, China is "crowned the world's pre-
eminent country". (Who makes these crowns, anyway? Wait, let me guess --
they're made in China, but awarded by a London-based committee.)

We've done this one before. Hitchens
([http://articles.chicagotribune.com/1990-06-17/entertainment/...](http://articles.chicagotribune.com/1990-06-17/entertainment/9002190154_1_christopher-
hitchens-czeslaw-milosz-english-connection)) used to call it "Our Greece to
their Rome" \-- the wise British counselors would advise the Americans how to
run their Empire. It's like the committee decided to trade in for someone else
to advise.

And "the Pacific Century begins". What does this even mean? Is it just to goad
page views and comments? "Crowning the Dragon"? Really? Why so eager to reach
for that metaphor? Do we have to search around for something to put a crown
on?

~~~
ChuckMcM
So there are a lot of interesting things that come with being the largest
economy on the planet. Not the least of which is pricing power over the other
economies. There is also the ability to project force. In a number of analyses
of WWII what "won" it for the allies was the US _economy_ , and the ability
for that economy to out produce war material than the axis powers combined.

Not that we would, but should the US and China engage in endless WW2 style
battles of attrition, the larger economy wins that engagement. Because at the
end of the day the ability to replace assets trumps any initial tactical
advantage.

A number of well respected economists have debated the 'reality' of the
Chinese economy and the UN has tried to get a qualitative measure that avoids
over reliance on government supplied numbers.

There is always the possibility that China will stumble again, unable to
balance its form of governance against its population's outrage, but if it
does not, well its going to be able to push around more people without being
overly concerned about the US being able to pressure others to resist. The way
that works is as follows.

Country A taunts country B, country C tells country D to push back on them or
their relationship with C will be in jeopardy, maybe C tells D, E, F, and G to
make a fuss. They comply because they are economically dependent on C. Country
A backs down. B is grateful. But if country C taunts country B, and Country A
doesn't have the influence to get anyone else to push back on that taunting.
Country C gets its way. How those scenarios play out is very dependent on the
relative sizes of Country A's economy and Country C's economy. Politicians are
particularly afraid of biting the hand that trades with them.

~~~
usaar333
> Not that we would, but should the US and China engage in endless WW2 style
> battles of attrition, the larger economy wins that engagement. Because at
> the end of the day the ability to replace assets trumps any initial tactical
> advantage.

I don't think it is quite this simple. You could argue that the country that
can sustain the higher defense budget will win [1], which is actually the
United States. Reason being that China's population is 4x that of the United
States, so significant parts of GDP need to just go to keeping everyone alive.

[1] In the past; these days the US' technology superiority over China is so
large that short-term budget changes still couldn't give China the edge.

~~~
ChuckMcM
In response to your footnote, this was an interesting quote I read about
Germany in WW2 :

 _" Historians have generally thought of the Type XXI—along with other systems
like the Me 262, V-1 and V-2 rockets, and the Tiger tank—as an example of
Wunderwaffen, wonder weapons. Since 1945 many have fixated on the
revolutionary military technologies that the Third Reich developed in the last
two years of the war. The cultural impetus behind the concept, as implicitly
or explicitly acknowledged by historians in the uneven and largely
enthusiastic literature on the subject, was an irrational faith in technology
to prevail in operationally or strategically complex and desperate situations.
a conviction amounting to a disease, to which many in the Third Reich were
prone in the latter years of the Second World War. To the extent that it
shaped decision making, faith in the Wunderwaffen was a special, superficial
kind of technological determinism, a confidence in the power of technology to
prevail over the country’s strategic, operational, and doctrinal
shortcomings"_

From this:
[http://www.usnwc.edu/getattachment/dd165021-2812-40ba-847f-d...](http://www.usnwc.edu/getattachment/dd165021-2812-40ba-847f-d5b4c3e4ac4e/Innovation-
for-Its-Own-Sake--The-Type-XXI-U-boat.aspx)

When I read it, it reasonated with a lot of the narrative I hear in policy
circles about China as a military power. The reasoning goes like this; The US
as an insurmountable technological edge over China, todays wars are technology
heavy, therefore the US has an insurmountable military edge over China.

Personally, I expect that reasoning to prevail until the Chinese are sending
people to the Moon and getting them back alive. Such a situation will deny
that China is just "re-using old soviet gear" and "they can't mount a complex
technological development program" in one stroke (both arguments I hear from
the 'paper tiger' camp). Interesting times.

------
joshuahedlund
For a more nuanced discussion of the relative merits and drawbacks of PPP GDP
(where China is about to become #1) vs nominal GDP (where China is not) see
[http://blogs.wsj.com/economics/2014/04/30/chinas-economy-
sur...](http://blogs.wsj.com/economics/2014/04/30/chinas-economy-surpassing-u-
s-well-yes-and-no/)

tl;dr traditional GDP ignores stronger effects of cheaper local currency like
China can pay its military less than US can, PPP GDP ignores weaker effects of
cheaper local currency like China can't import foreign goods as cheaply as US
can

------
contingencies
Well, sitting here in China and observing its changes for 13 years so far,
including the initial WTO membership rah-rah, I would counter much of the
commentary here with the less obtuse statement that _China is certainly the
world 's largest economy with some very interesting properties_: (1) The
government roughly controls all of the economic statistics, and thus roughly
controls international perspective on the economy. (Foreign organizations are
not legally allowed to conduct independent market research.) (2) The
government roughly controls all the education and media, except small corners
of the internet, and thus roughly controls domestic perspective on the
economy. (3) Foreign banks are heavily restricted, for example from providing
many business-critical account services. (Despite WTO related promises) (4)
The government controls its own domestic settlement network, and apparently
mandates its use for interbank payments. This nominally acts to preserve
national privacy versus using standard international Visa/Mastercard and SWIFT
networks while asserting strong control. (5) Currently, as detailed in my
OHM2013 talk at
[http://www.scribd.com/doc/215642587](http://www.scribd.com/doc/215642587) the
government is also aggressively asserting the RMB as a regional reserve
currency.

------
rubyn00bie
Preface: This is a rant...

============================

Thank fucking god.

The greatest distraction the United States has ever dealt with-- being the
'number one' economy. It makes me sick people have seen this as a sense of
pride, or even as something to be "sad" about.

... It is too bad we've pissed away the opportunity, it didn't have to be like
this...

It, for the United States, has done nothing but acted as a catalyst for
systematic and perverse exploitation of our people and resources for gain of a
few with "wealth." It has given the evil of the world a corruptible,
unstoppable force to push their agendas.

Our democracy has proven to be much weaker than it's ruling sibling, 'crony-
capitalism' or 'socialism for the wealthy' (whatever you want to call it).

Look at the amount of money we blow up in the desert fighting redneck farmers
(that's what they are, they just speak a different language). Looking at the
money we spend on death of outsiders, compared to helping the people of our
own nation, should make anyone feel nauseated.

This is one step toward a less powerful United States, and dare I say a much
better one. We'll still be the world's reserve currency for a while, but this
is still a step to fixing the inherent systemic problems within the United
States.

Economic power doesn't mean high quality of life, and shouldn't be a sense of
pride, hopefully the nation begins to understand this. There's more to life
than being exploited money.

C.R.E.A.M. -- Cash Rules Everything Around Me

~~~
Lost_BiomedE
_We 'll still be the world's reserve currency for a while, but this is still a
step to fixing the inherent systemic problems within the United States._

Unfortunately, being the world's reserve currency is the driver of our wars.
Until the dollars for oil trade changes, we back our currency with a big gun.

~~~
encoderer
Hmm.. IMO you might be confusing correlation and causation here.

You think the geopolitical relationship between us and OPEC countries would be
different if only we paid in Euros?

What _will_ move the needle on this is simply _not buying their oil._ And
that's precisicely what's happening.

Say what you want about fracking, I'd rather pull petroleum out of shale than
buy it from Opec.

~~~
Lost_BiomedE
_You think the geopolitical relationship between us and OPEC countries would
be different if only we paid in Euros?_

We invaded Iraq over that threat.

------
coreymgilmore
The problem I have with any reports of China's economy (GDP, inflation,...) is
that fact that outsiders of the Chinese gov't do not know how doctored the
numbers are. The Chinese could have been (and are still continuing) in cooking
the books to achieve the #1 economy. It is one of those "if the number is
bigger, it is better" kind of deals.

Could the US (and other countries) be doing something similar, absolutely. But
China has been known for economical "miscalculations" and the fact that it is
still a more-or-less communist run system.

Sure they may have the biggest number on paper, but I really don't think the
US has anything to worry about.

~~~
bayesianhorse
On the one hand I don't trust Chinese numbers a lot, but they seem to be at
least in the ball park to the actual numbers, and even that is a major
achievement considering the size of the Chinese economy, its lack of
technology in many parts and a bureaucracy which isn't exactly renowned for
its "accuracy".

In general, if this "PPP" calculation shows China overtaking the US, this is
probably happening in "PPP" terms. Doesn't mean they have more economic weight
in the world, though.

------
tn13
The fact that US will become China's bitch sooner or later is a foregone
conclusion. The question is when and how fast.

Present day US still remains a force to recon with. It still has an
astronomical military budget. But it is also a debt ridden country who is
stilling from the productive parts of its society and burning it off on the
least productive people in society creative very perverse incentives which are
exactly opposite of what happened in the 19th century.

~~~
gress
And China is a modern utopia where everyone's creative potential is allowed to
flourish. It has no major problems to overcome. No economic instability,
ethnic conflict, pollution, food insecurity, corruption...

We'll all wish we lived there soon.

~~~
tn13
No soon, but very well it might be in near future. Actually China might have a
better work visa policy than that of America down the line.

~~~
gress
Being the worlds largest didn't make the USA's social problems go away. Why
would China be any different?

~~~
tn13
You have no idea how better USA is on almost all parameters than many large
countries like India or Brazil.

~~~
gress
But not much better than china on those parameters?

(Having lived in both India, and the USA, I think I do know)

------
ausjke
I don't really worry about the GDP too much.

What worries me is that in US, lawyers/sports/movie-stars are such a fashion
that those who are good at STEM are called nerds in school, that many college
students can not do basic math nowadays, while China produces 8M college
students per year, most are trained well in STEM.

in the long run, STEM rules for the country, a strong country can not be built
upon pop music and attorneys for too long, this is the real problem IMHO, the
largest economy comes secondly.

not to mention, Hispanics will lead the popular votes soon due to their birth
rate, but that's a separate issue and I'm off-topic.

The future here is gloomy, sadly, but it's normal when you zoom out the
history timeline, strong countries come and go.

------
justinzollars
GDP PPP seems to be pretty useless for such comparisons. Nominal GDP should be
used. According to the following three sources:

* International Monetary Fund,

* World Bank

* CIA World Factbook

the crown of the world's largest economy belongs to the European Union (and
has belonged for some time now).

~~~
GeneralMayhem
The EU isn't a state, though...

------
Thiz
Honest question. Do they print a trillion dollars (equivalent) a year out of
nothing?

I'd like to know the impact of printing paper money in the world's largest
economy. In our case, we will know for sure in the next couple of years.

~~~
mark_l_watson
+1 I would like to know the answer to that question also.

BTW, does the fed reserve/government only create $1 trillion/year out of
nothing? I thought it was more. I just finished reading "What has the
Government Done with Our Money" ([http://www.amazon.com/What-Government-Money-
Percent-Dollar-e...](http://www.amazon.com/What-Government-Money-Percent-
Dollar-
ebook/dp/B0033AH2DM/ref=sr_1_fkmr0_2?ie=UTF8&qid=1398893775&sr=8-2-fkmr0&keywords=whhas+the+government+done+with+our+money))
- a good read, but nothing new for anyone leaning towards Austrian Economics
instead of fiat money.

------
_pmf_
"Will". Cute Americans.

------
sharemywin
These studies are really scewing with our(USA) world view. We used to be the
country with the biggest GPD and highest middle class income. Now we have
neither. At least we have the most pisioners and guns per capita. No one is
going to take that away from us anytime soon.

~~~
switch007
> These studies are really scewing with our(USA) world view

The rest of the world is just fine with that. :P

~~~
thesimpsons1022
sometimes i think the USA be better off it was split into different countries.
Just sucks having massive federal laws that blanket the entire country even
though conditions are way different.

~~~
bayesianhorse
But then you wouldn't want to check in on the democratic processes of 50+
different nations to tell if you have a dictatorship or something even worse
on your continent.

You think the TSA is a lot of trouble now? Imagine fifty states trying to
secure borders...

You think massive federal laws are annoying? Imagine what 50+ nations have to
do in terms of bilateral treaties to keep minimal relations in trade,
education, defense...

~~~
thesimpsons1022
not really.. It'd be more like europe. Most of our states are the size and
population of european countries anyways. California would be perfectly fine
by itself.

~~~
bayesianhorse
Europe does have these problems all over the place. Some are kept in check by
the EU which fulfills a lot of the functions of the US federal government.
There are ramifications to opening borders for people and goods...

------
nihaody
Big Ole Asterisk for this by the name of PPP (Purchasing Power Parity)

PPP is very useful to make comparisons about standards of living and
affordability of different regions, but it's pretty much useless in measuring
a nation's total economic output for global comparison.

While it's useful to say somebody making US$10k a year in China has the same
real purchasing power as somebody making US$50k in the US and US$70k in
Germany it's totally meaningless when comparing country's economies on a whole
against each other.

China is still a very very long way away from overtaking the US or the EU (if
you count that as a country which people seem to do) in actual real GDP.

This whole "revaluation" is some of the biggest bunch of click bait trolling
I've ever seen. Appeals to the uneducated masses though I presume.

