The Chinese economy has now passed the U.S. economy as the largest economy in the world, at least according to data provided by the International Monetary Fund (IMF). The IMF has projected that China will produce $17.6 trillion, which edges the $17.4 trillion that the U.S. is expected to produce. Just a decade and a half ago, the United States produced three times what the Chinese managed, but that gap has closed very quickly. Projections had long shown that this would inevitably happen, although it happened a lot sooner than many people expected it to.
Officially, at least according to the IMF, China has passed the U.S. as the world’s largest economy, but there are qualifiers that could serve as asterisks to that statement. It should be noted that China’s passing of the U.S. economy is not complete, as this rating only takes into consideration what is known as Purchasing Power Parity (PPP). Using PPP in real terms, China is now responsible for 16.5 percent of the world’s economy, while the United States is responsible for 16.3 percent. Still, China still trails the United States in terms of pure wealth. The GDP of China just a couple of years ago, according to IMF statistics in 2012, was estimated to be at $8.25 trillion, which is a little more than half of what it is estimated to be for the United States, at $16 trillion. Yet, since goods are cheaper there, the Chinese effectively have more buying power than Americans have in the U.S.. On average, Chinese people can buy more goods than Americans because these tend to be significantly cheaper there than they are in the United States.
The United States has enjoyed its status as the world’s largest economy for almost a century and a half, when it first officially gained this distinction back as 1871. It had remained the world’s leading economy since. To put that in perspective, Ulysses S. Grant was the president when the United States began this run as the world’s largest economy. The South was still undergoing reconstruction following the devastation when it was defeated in the Civil War just six years earlier, the same year that Lincoln was assassinated. The U.S. remained the world’s leading economy through the final days of westward expansion, through two world wars in the 20th century, through the Cold War, and well into the 21st century. It retained this distinction until China, the world’s most populous nation, finally managed to overtake it this year. The Asian nation’s growth has come at a very rapid clip, as the country achieved a level of economic growth that made the rest of the world envious ever since market reforms were instituted in 1978. Much of the country has been lifted out of poverty and modernized in a hurry, although there still are high levels of poverty that exist there.
For the time being, however, China still trails the United States by $6.5 trillion in terms of its raw economic power, making China’s rise to the status as largest economy in the world incomplete by some estimates. Also, there are fears both inside and outside of China that the nation is on the verge of an economic collapse that would compromise glossy reports of enormous economic growth. For now, however, at least according to official IMF statistics, the Chinese economy has already passed the U.S. as the world’s largest economy.
By Charles Bordeau
Photo by Hugi Ólafsson –Flickr