IMF Declares China Will have Top Economy By 2016

by Amit Ben-Yehoshua and Steve David Salem

The IMF have declared that by 2016 China will surpass the U.S. and become the world’s largest economy. According to the report, mentioned in Singapore-based newspaper Lianhe Zaobao, China’s economic output will overtake that of the U.S. in terms of purchasing power parity (PPP) and reach $19 trillion by 2016. PPP is a way of estimating the amount of adjustment needed on the exchange rate of two countries in order for the exchange to equal each country’s purchasing power. For instance, if a hamburger in the U.S. equals $2 and the same item in the UK equals £1, the currency exchange rate should equal $2 to £1.

This news represents quite a change for China, who back in 1980 produced only 2.2% of the world’s economic output. Now, this figure rose has risen nearly seven-fold to 14% and the expectations are that it will reach 18% – nearly a fifth of the world’s economic output – by 2016. This figure will overtake the U.S.’s projected figure of 17.7% for this time period.

Thus, it seems that the discussion should be when, rather than if China overtakes the U.S., having recently overtaken Japan as the second largest economy. Such figures also mark a significantly accelerated projection from previous estimates. According to ‘When China Rules the World’ (written by Martin Jacques), Goldman Sachs estimated that it would take until 2050 for China to overtake the United States with a projected GDP of $70,000 billion.

Finally, whilst officials notice that China is still a developing nation with a host of future development problems, it seems like we might have a new world leader in the near future.

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