Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
The IMF PPP numbers are based upon the World Bank calculations of PPP from 2005. Based on the World Bank 2005 numbers, everyone in Asia starved in the 1950’s because they had less GDP per capita than they needed to feed themselves. This shows how the World Bank statistics were wrong because they are not historically consistent.
The weakening US dollar could make the get rid of the need for the PPP debate, because if the US dollar falls to 3 chinese RMB to 1 US$ then China will pass the US on an exchange rate basis in 2016 or 2017.
We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else. America overtook Great Britain as the world’s leading economic power in the 1890s and never looked back.
And both those countries live under very similar rules of constitutional government, respect for civil liberties and the rights of property. China has none of those. The Age of China will feel very different.
Victor Cha, senior adviser on Asian affairs at Washington’s Center for Strategic and International Studies, told me China’s neighbors in Asia are already waking up to the dangers. “The region is overwhelmingly looking to the U.S. in a way that it hasn’t done in the past,” he said. “They see the U.S. as a counterweight to China. They also see American hegemony over the last half-century as fairly benign. In China they see the rise of an economic power that is not benevolent, that can be predatory. They don’t see it as a benign hegemony.”
The rise of China, and the relative decline of America, is the biggest story of our time. You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities. Last fall, when I attended a conference in London about agricultural investment, I was struck by the number of people there who told stories about Chinese interests snapping up farmland and foodstuff supplies — from South America to China and elsewhere.
* under IMF staff estimates, the U.S. gross-debt-to-GDP ratio is not projected to stabilize over the forecast horizon and would exceed 110 percent by 2016, compared with less than 90 percent in the euro area and almost 250 percent in Japan