Rise of the Chinese economy, fall of the US hegemony?


Wednesday, October 15, 2014 8.56 PM / Meristem Research


China; the new economic superpower


The Chinese economy, being largely government controlled and undeveloped, was nothing to reckon with prior to 1978. However, with some dosage of capitalist reforms in a slow and steady fashion, the economy has recorded average annual growth of c.10% over the last 30 years.


More striking is the outpacing of the United States as the biggest global economy when measured by Gross Domestic Product (GDP) in Purchasing Power Parity (PPP) terms; China USD17.6tn, US USD17.4tn. However, judging by per capita GDP, China (USD 12,893) remains dwarfed by the United States (USD54,678).

Given the drivers of the respective country's GDP and its forecast growth rates (7.3% for China and 2.8% for the US), it is unlikely the US economy catches up. IMF estimates that by 2019, the differential would have widened to USD4.7tn from c.USD220bn. However, in the long run, the Chinese economy will need to be more powered by Consumer Demand and more of Private Sector to sustain its growth momentum.


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