China is 2nd largest economy

 

The Chinese government said on Friday that they have surpassed Japan and are now the second largest economy in the world. This is no surprise to anyone. In fact, I thought this had already occurred. What is noteworthy are the projections of when China’s economy will surpass the Unites States’.

The U.S. economy is almost three times as large as the Chinese economy at the moment which is a very large difference. However, current estimates say China will become the world’s largest economy in about 10-15 years. This estimate assumes that China will continue to grow at a similar pace that they have been for the last several years. While that is possible, it is also very possible that this growth rate will slow down and be more like other, more developed countries as they develop.

With 1.3 billion people, more than four times as many as the U.S., China should eventually be the biggest economy. Actually, India also has over a billion people and should also be up there at some point in the future. For China, there are issues with the future labour pool and the potential for labour shortages in the future. This can derail their growth trend. Also, it is tough to look 10-15 years in the future and accurately predict how an economy will effectively multiply itself by two.

When there is such a dramatic shift in the world in a relatively short amount of time, it can make for a volatile world in many ways. American economic dominance sets the global political landscape as well. Certain countries align themselves with the U.S. to benefit from the economic power they have while others go against them for numerous other reasons. However, if this tide begins to turn, who knows which countries will change politically and how that will affect the global political landscape? These are aspects that certainly did not factor in to these projections and they are almost impossible to predict, but they can play a major role in the economic outcome for China.

We also don’t know what other factors will shape the world in the next decade or so. I spoke about various countries’ political motivations, but there are also purely economic factors that cannot be predicted. For example, very few people predicted three years ago, let alone ten years ago, that the world would enter a period of deep recession triggered by a housing market collapse in the U.S. This recession changed many countries’ plans and goals and another recession like this that centres around China will do the same for them.

Although we can not know when the Chinese economy will surpass the U.S.’, it seems likely that at some point it will happen due to their massive population size. In light of this, the U.S. needs to start thinking about what its role will be when this does happen as they will no longer be the only superpower in the world, at least not economically. They need to become more energy independent because this will help suit their new role very well and be very beneficial for them. Hopefully, this type of investment will keep increasing.