Wednesday, January 19, 2011

superpowers square off

it’s been a while since we looked at the coming chinese hegemony, and as the Peterson Institute for International Economics has recently opined that China has now overtaken the US in purchasing power, it seems an update in in order…

the measure for purchasing power parity i’ve always used comes from the CIAs world fact book, and according to their 2010 estimates, the US is still #1 @ $14,720,000,000,000, while china is still a distant second @ $ 9,854,000,000,000; my original extrapolation of growth rates had china passing us circa 2014 or 2015, and i see nothing in the cards to alter that assessment yet…

recently, The Economist put together a tool which allows you to plug in growth, inflation & appreciation assumptions to determine when China will overtake the US as the world's largest economy…even using nominal GDP, you can play with this and see it’s pretty difficult to imagine a scenario where the US can remain on top much longer than 10 more years…

this past march, the economist suggested that the yuan was 49% undervalued; so even with the 5% appreciation in the yuan since, it would still be nearly 44% undervalued by their measure today; so to determine today’s purchasing power parity using the Economist’s figures you’d have to add about 78% to the current nominal GDP; obviously, this gadget lets you apply that appreciation gradually over time…

there are other means of comparison we could use as well, for instance, we know that this past summer, China passed the U.S. to become the world's #1 energy consumer, moreover, their electricity consumption is still growing at a 15% rate annually…and although they just passed the US in car sales in 2008, they’re well on their way to dwarfing our sales now: chinese new vehicle sales grew to 18.06 million units last year, while US dealers sold only about 11.5 million new cars and trucks in 2010…

1 comment:

  1. Thats about it.
    I take it this is if everything stays the same geopolitically.
    IMO It could happen sooner.

    China now has 20% of their population in the middle class.
    In 10 years it will be 40%.
    Where will America's middle class be?

    China is building a China/Asian consumer base.
    Soon they will not need what is left of the American consumer base.

    It all comes back to cheap labor, and natural resources. China has both.

    This is China's century.
    All the China nay sayers are fools.

    American Corps are American in name only.
    The multinational are already heavily invested there.
    Coca-Cola GM, Caterpillar, GE. Boeing, Carlyle Group, etc, are already imbeded in China.
    They are not coming or even looking back at the good ol U.S.A.

    The real question is.
    Was this all by design?
    Since I do not believe in coincidences.
    I must believe that, yes it is by design.