Sorry, kids, it looks like the U.S. isn't top dog anymore. China's economy just eclipsed America's economy to become the largest in the world, according to the latest figures released by the International Monetary Fund of the world economy. The IMF report stated that China will produce $17.6 trillion this year, compared to America's measly $17.4 trillion.
That's actually a pretty considerable difference, because there are 12 zeros in a trillion — but you do the math, because all those big numbers boggle my mind. Measured by economic output, that effectively makes China number one. As Brett Arends at Market Watch put it, if measured in real "purchasing-power terms," China now accounts for 16.5% of the global economy, and the U.S 16.3%. This development comes on the heels of China surpassing the U.S. last year to become the world's biggest trading partner.
Arends reported that although China's progress was expected (I mean, I've been hearing for years now that China is going to be the most powerful country in the world) it happened way sooner than anyone predicted — mostly due to the country's recent change in the way they calculate gross domestic product up to international standards, which revealed previously unaccounted-for activity. The calculations they now use are a widely practiced economic measure called purchasing-power parity, or PPP.
But take heart — if not measured by PPP, China's GDP is $6.5 trillion less than America's in raw terms, and it will probably take a while for the Asian giant to overtake that. In a Vanity Fair column, Joseph E. Stiglitz, an economist and Columbia University professor wrote that China's growth will only add to that of the U.S., too:
The world economy is not a zero-sum game, where China’s growth must necessarily come at the expense of ours. In fact, its growth is complementary to ours. If it grows faster, it will buy more of our goods, and we will prosper.
It's really not surprising that China's economy is now number one — for a nation with 1.3 billion population, the largest in the world, it makes sense that its economy would reflect that. It's a big deal, though, according to Arends, because that means China's growing economy means it will have to shoulder some responsibility as an international vanguard of "civil liberties, democratic processes and constitutional rights." He wrote:
Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power... This will not change anything tomorrow or next week, but it will change almost everything in the longer term.
Now if only China can figure out how to deal with the $6.8 trillion loss in bad investments it made over the past four years.
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