Emerging markets will overtake US/Europe eventually
- By Hu Biliang
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E-mail China.org.cn, February 17, 2015
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A mixed story [By Zhai Haijun/China.org.cn] |
An International Monetary Fund (IMF) report early last October revealed that China overtook the United States in 2014 to become the world's largest economy based on Purchasing Power Parity (PPP), a new economic gauge. Based on the PPP measurement, it calculated China's gross domestic product (GDP) at US$17.6 trillion, US$200 billion higher than the U.S.
Using the same calculation, it found that seven emerging economies - China, Brazil, Russia, India, Mexico, Indonesia and Mexico - also dubbed as new "G7," had surpassed the old one dominated by the most developed countries, including the United States, Britain and Japan, with a gap of US$3.3 trillion.
Despite its controversial approach, the PPP-based calculation is a moderately reasonable way to reflect the economic realities. Besides, the rapid growth of the emerging economies represented by the new "G7" is now widely accepted.
It is still too early to be optimistic, however. China's GDP lags far behind of the United States calculated purely on market exchange rates, while per capita GDP is only 15 percent of the American level. And China still doesn't rate in soft power compared to the U.S.
History shows it may take several decades or even a century for one country to surpass another. The United States did not overtake Britain as the world's top economy until the end of World War II even though swing had started half a century earlier.
Policies of reindustrialization adopted by the Barack Obama's administration have lifted the country out of the economic meltdown caused by the subprime mortgage crisis in 2008. In the coming five to eight years, the U.S. economy will keep good momentum with improved employment and breakthroughs from new inventions and techniques.
However, long-term, the United States has fewer advantages in manufacturing industries compared to China and East Asian countries.
Europe, meanwhile, has not yet recovered from economic slowdown. However, in my opinion, with impeccable infrastructures, comprehensive legal systems and great innovative abilities in sciences and technologies, Europe will revive in 10 to 20 years - on the precondition of being able to establish a highly integrated institution to ensure smooth economic running with a single currency.
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