China vs Usa

Will China’s Gdp overtake the US Gdp by 2025?

YES ARGUMENTS

Info

China is the second-largest economy in the world.

In 2011 the GDP of China was worth 7298.10 billion US dollars in 2011, according to a report published by the World Bank.

The GDP value of China is roughly equivalent to 11.77 percent of the world economy.

From the book “The Growth Map” written by Jim O'Neill (the head of Goldman Sachs Asset Management): “Since 2001, China's GDP has risen fourfold, from $1.5 trillion to $6 trillion. Economically speaking, China has created three new Chinas in the past decade. And it's likely that the combined GDP of the four BRIC nations will exceed that of the US sometime before 2020.”

China’s contribution to the GDP

Medium Blue – Household Consumptions

Light Blue – Net export

Red – Government Spending

Dark Blue - Investment

Green - Charges on inventories

Arguments

1. Starting from historic perspective:

China’s Economic Growth: over the period from 1979 to 2006 growth averaged 9,7%. Exports grew from 18 billion USD in 1980 to $969 billion USD in 2006, while imports over this period grew from 20 billion USD to 791 billion USD.

For the first decade of the 21st century the GDP of China grew at the rate of 10.7%. The GDP increased from 13,172.41 USD billion in 2011 to 59,504.61 billion USD in 2010.

2. Trade: US vs China. US deficit / US trade imbalance

Trade balance is a component of GDP: other things equal, a surplus increases GDP and deficit reduces it.

In financial terms, trade balance influence the total size and the composition of the current-account balance and, more broadly, it influences the balance of payments (which comprehends not only the trade balance but also income payments, loans and aid from abroad, etc).

In particular, long-lasting trade deficit can lead to foreign debt, on which a country has to pay interests. If this debt is judged by market agents as unsustainable, a currency...