China Just Overtook The US As The World's Largest Economy

[freedquaker]

MDMAlliance said:

freedquaker said:

MDMAlliance said:

There's also the fact that China is cheating by artificially keeping their currency low.  That will eventually come back and bite them in their butts.

I am not exactly sure about their practices but additionally, one needs to look into the share of consumption in the economy. We don't typically do this, as the shares usually do not change as much between countries (or at least stable over time) but Chinese economy is an ANOMALY. What do I mean by that?....

Now, the well being of people is not measured in income but CONSUMPTION, and for example, if you are investing most of your income, and there is hardly anything left to consume, then you may LOOK wealthy but you are actually MISERABLE. In US, the share of consumption is 70% whereas it is measly 35% in China. This means, whatever number you see in Chinese GDP/cap PPP, the Chinese actually end up spending only 35% of it.

Let me give you an example....

GDP-PPP(2013), from IMF

US : $ 53.001

Consumption share : $37100

China : $ $11.868

Consumption share : $4.154

 

So the difference is much larger than it appears...

I actually have a class where we had to discuss this topic, and this was one of the things I was going to bring up, but the professor thought I was talking too long already, as I was talking about the need for a transitioning labor force as China would need to do to increase their production while not having to spend larger amounts of money for operation as the pressure to create a more fair wage for the people working in the factories.

A small correction,

I was referring to the GDP/cap PPP... I forgot to add the "/cap" part. Anyways...As you said, the main reason for rapid increase in Chinese GDP is sort of the artificial state incentives for investment, industrial production and exports... Well, this does not happen in the natural way, thus leading to an unparalleled imbalance between investment and consumption.

Although high investment is a good thing for the FUTURE of the country (and the prospective income), this unbalanced and rapid growth leads to major problems such as...

a) Extreme income inequality, especially benefitting those who take those initiatives but leave others with little return

b) High inflation, putting even more pressure on the ones who are on the wrong side of the equation

c) Minimal or negative returns to marginal investment, as returns to investment diminishes rapidly and too much investment goes to waste, not only as lost income but also unreaped benefits (consumption) and depleted resources.

d) Permanently distorted labor and economic market (due to rapidly increasing wages, radically changing employment structure, rapid urbanization etc)...

....