December 16, 2010

When Will China Overtake the U.S.?

Even though the China's GDP is sitting at 2/5 the size of America's, some economists hypothesize that China will have the largest economy by 2012. It used to be thought by Goldman Sachs, that if China was to overtake us, it would happen no sooner than 2041. Some recent studies done by Goldman Sachs have shown that they could overtake us by 2041. This economic downturn we have experienced in the U.S. has weakened our economy a great deal. This, combined with China's rapidly growing population, and industrailization, has granted them the ability to quickly make up lost ground that we previously held. In fact, China's economy has grown by an annual average of 10.5%, While America has a mere 1.7% average annual growth. This paints a relatively dim picture of our economy in America, and views China as nearly divine, but this fact alone does not provide enough data to make accurate assumptions. It seems obvious, based on past experiences, that the growth rate in China will slow, but with such a large rate of growth, they can afford to slow down a little.
These statistics show that the U.S. has lost much of its economic power, but it does not show why. Inflation rates in China are rising at a rate that is nearly half of their growth rate, which means that the Chinese yuan is not worth nearly as much as the U.S. dollar. The previous statistcs also do not provide the information about the populations of the two countries. The GDP per head in America is four times as large as China's, because China's population is so much larger than ours; the prosperity experienced in America will be far greater than that of China's, because the wealth per person in the United States is fmuch larger than China's.

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