International Monetary Fund (IMF) officials have forecast that by 2016, China’s economy will be larger than that of America in real terms, and that’s merely five years away.
According to the IMF, under PPP, the Chinese economy will expand from $11.2 trillion in 2011 to $19 trillion in 2016. Meanwhile, the size of the U.S. economy will rise from $15.2 trillion to $18 trillion. This implies that, in terms of America’s share of the world output, this would fall to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
Just 10 years ago, the U.S. economy was three times the size of China’s.
The expansion of China’s economy has come about as a result of decades during which successful economic policies aimed and national expansion and power were pursued. On the other hand, the U.S. has embraced free trade policies.
According to Ralph Gomory, research professor at NYU’s Stern business school:
“There are two systems in collision. They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”
