With Hu Jintao about to arrive in the US, it seems like a good time to revisit this fascinating question. Americans seem rather confused about this topic. Some opinion polls suggest that most Americans believe that China is already the world’s largest economy. On the other hand some participants in this NPR radio discussion I took part in over the weekend, seemed to believe that the great ”sorpasso” is still many years away – thirty or forty years, at least. So what is going on?
Both positions are wrong. China is not the world’s largest economy. But the day when it will achieve this status is probably less than a decade away – and we are talking the largest economy in absolute terms (ie not adjusted for purchasing power).
The most famous projection was made by Goldman Sachs projection, which foresaw “China as number one” by 2027. But GS predicted this before the financial crisis and the slowdown in the American economy. Post crisis, the date seems to have moved up a bit.
There was a very good piece on this topic in a recent edition of The Economist – since it was the Xmas edition and it was buried away in the middle of the business section, it was easy to miss. But anyway -based on a variety of projections about growth rates, currencies etc – The Economist now reckon that China’s big day will come in 2019. They have even made a game of it, in which you can feed in your own assumptions about growth rates and see the effect.
Now, let me add the inevitable qualifiers. First, we should remember that we are dealing with abstractions here – the “size” of an economy is calculated by crunching together all sorts of statistics of dubious origin; all the more dubious given that a lot of these stats are made in China. Second, we should acknowledge that there is not an absolute read-across that ensures that size of economy = political power in the world. America may continue to be the world’s most powerful nation, for some time after its economy is no longer the biggest in the world – its network of alliances, its military and technological prowess, its position at the centre of international organisations may all help to ensure that.
Still, there clearly is a strong relationship between economic and political power – so it will be quite a moment when China is officially declared the world’s largest economy. Apart from anything else, it will be the first time for more than a century that that title is held by an undemocratic country.