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China's economy will become the world's
largest sometime in 2015-2020 if projected growth rates for China and
the US materialize. There is a common mistake to emphasize Chinese
incomes in dollar amounts, when in reality the issue is an undervalued
Chinese currency. A person in China buys with $100 dollars what a person
would buy with $1000 dollars in the US or Europe. Therefore, the most
exact measure to China's economy is using the PPP (Purchasing Power
Parity) and when this method is used, China's economy is already the
world's second largest economy and closing in on the US very fast. At
this rate, China will surpass the US in GDP in less than 20 years
assuming China maintains a 7% economic growth and the US 3.5%. By then,
the imbalance in currency valuation will likely disappear and China will
influence the world at a super power scale economically, militarily, and
politically. To give a better
perspective on China's economic rise, look at the text below taken from
the CIA World Fact book http://www.cia.gov
China's trade fueled by an undervalued currency
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Economy - overview:
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In
late 1978 the Chinese leadership began moving the economy from a
sluggish Soviet-style centrally planned economy to a more
market-oriented system. Whereas the system operates within a
political framework of strict Communist control, the economic
influence of non-state organizations and individual citizens has
been steadily increasing. The authorities have switched to a system
of household and village responsibility in agriculture in place of
the old collectivization, increased the authority of local officials
and plant managers in industry, permitted a wide variety of
small-scale enterprise in services and light manufacturing, and
opened the economy to increased foreign trade and investment. The
result has been a quadrupling of GDP since 1978. In 2001, with its
1.27 billion people but a GDP of just $4,300 per capita, China stood
as the second largest economy in the world after the US (measured on
a purchasing power parity basis). Agriculture and industry have
posted major gains, especially in coastal areas near Hong Kong and
opposite Taiwan, where foreign investment has helped spur output of
both domestic and export goods. On the darker side, the leadership
has often experienced in its hybrid system the worst results of
socialism (bureaucracy and lassitude) and of capitalism (windfall
gains and growing income disparities). Beijing thus has periodically
backtracked, retightening central controls at intervals. The
government has struggled to (a) collect revenues due from provinces,
businesses, and individuals; (b) reduce corruption and other
economic crimes; and (c) keep afloat the large state-owned
enterprises many of which had been shielded from competition by
subsidies and had been losing the ability to pay full wages and
pensions. From 80 to 120 million surplus rural workers are adrift
between the villages and the cities, many subsisting through
part-time low-paying jobs. Popular resistance, changes in central
policy, and loss of authority by rural cadres have weakened China's
population control program, which is essential to maintaining
long-term growth in living standards. Another long-term threat to
continued rapid economic growth is the deterioration in the
environment, notably air pollution, soil erosion, and the steady
fall of the water table especially in the north. China continues to
lose arable land because of erosion and economic development.
Beijing will intensify efforts to stimulate growth through spending
on infrastructure - such as water control and power grids - and
poverty relief and through rural tax reform aimed at eliminating
arbitrary local levies on farmers. Access to the World Trade
Organization strengthens China's ability to maintain sturdy growth
rates, and at the same time puts additional pressure on the hybrid
system of strong political controls and growing market influences.
Although Beijing has claimed 7%-8% annual growth in recent years,
many observers believe the rate, while strong, is more like 5%.
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GDP:
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purchasing power parity - $5.56 trillion (2001 est.) |
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GDP - real growth rate:
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7.3%
(official estimate) (2001 est.) |
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GDP - per capita:
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purchasing power parity - $4,300 (2001 est.) |
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GDP - composition by sector:
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agriculture: 17.7%
industry: 49.3%
services: 33% (2001 est.) |
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Population below poverty line:
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10%
(2001 est.) |
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Household income or consumption by
percentage share:
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lowest 10%: 2.4%
highest 10%: 30.4% (1998) |
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Distribution of family income -
Gini index:
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40
(2001) |
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Inflation rate (consumer prices):
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0.8%
(2001 est.) |
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