Welcome to our new upgraded phpbb 3.2 forum! The upgrade is now complete. See announcement and new features here, or report any problems or issues here. Thanks for your patience.
Join John Adams, world renowned Intl Matchmaker, Monday nights 8:30 EST for Live Webcasts!
And check out Five Reasons why you should attend a FREE AFA Seminar! See locations and dates here.
View Active Topics View Your Posts Latest 100 Topics FAQ Topics
Discuss culture, living, traveling, relocating, dating or anything related to the Asian countries - China, The Philippines, Thailand, etc.
China overtakes Japan as No.2 economy: FX chief
By Aileen Wang and Alan Wheatley Aileen Wang And Alan Wheatley
Fri Jul 30, 9:40 am ET
BEIJING (Reuters) â€“ China has overtaken Japan to become the world's second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty.
Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No.1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others.
China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China's chief currency regulator, mentioned the milestone in passing in remarks published on Friday.
"China, in fact, is now already the world's second-largest economy," he said in an interview with China Reform magazine posted on the website (http://www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange.
Cruising past Japan might give China bragging rights, but its per-capita income of about $3,800 a year is a fraction of Japan's or America's.
"China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.
CAN IT BE SUSTAINED?
China's economy expanded 11.1 percent in the first half of 2010, from a year earlier, and is likely to log growth of more than 9 percent for the whole year, according to Yi.
China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said.
If China could chalk up growth this decade of 7-8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces.
In an assessment disputed by Beijing, the International Energy Agency said last week that China had surpassed the United States as the world's largest energy user.
If China can keep up a clip of 5-6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history.
The uninterrupted economic ascent, which saw China overtake Britain and France in 2005 and then Germany in 2007, is gradually translating into clout on the world stage.
China is a leading member of the Group of 20 rich and emerging nations, which since the 2008 financial crisis has become the world's premier economic policy-setting forum.
In one important respect, however, China is still a shrinking violet: anxious to shield itself from the rough-and-tumble of global markets, it does not permit its currency to be freely exchanged except for purposes of trade and foreign direct investment.
And Yi said Beijing had no timetable to make the yuan fully convertible.
"China is very big and its development is unbalanced, which makes this problem much more complicated. It's difficult to reach a consensus on it," he said.
In the same vein, China was in no rush to turn the yuan into a global currency.
"We must be modest and we still have to keep a low profile. If other people choose the yuan as a reserve currency, we won't stop that as it is the demand of the market. However, we will not push hard to promote it," he added.
NO BIG RISE IN YUAN
China has been encouraging the use of the yuan beyond its borders, allowing more trade to be settled in renminbi and taking a series of measures to establish Hong Kong as an offshore center where the currency can circulate freely.
But Yi said: "Don't think that since people are talking about it, the yuan is close to becoming a reserve currency. Actually, it's still far from that."
He said expectations of a stronger yuan, also known as the renminbi, had diminished. There was no basis for a sharp rise in the exchange rate, partly because the price level in China had risen steadily over the past decade.
"This suggests that the value of the renminbi has moved much closer to equilibrium compared with 10 years ago," he said.
Yi's comments are unlikely to go down well in Washington, where lawmakers have scheduled a hearing for September 16 to consider whether U.S. government action is needed to address China's exchange rate policy.
China scrapped the yuan's 23-month-old peg to the dollar on June 19 and resumed a managed float. The yuan has since risen only 0.8 percent against the dollar, and economists calculate that it has fallen in value against a basket of currencies.
China would stick to the principle of holding its $2.45 trillion of official reserves in a mix of currencies and assets.
The stockpile -- the world's largest - was so big that it was impossible to adjust its currency composition in a short space of time: "We won't be particularly bearish on the dollar at a given time or particularly bearish on the euro at another time."
(Additional reporting by Zhou Xin; Editing by Ken Wills)
At just 7% GDP and PPP growth, China is middle class in 15 years.
At 12%, 6 years.
The students here are taught that:
1) China is a poor country
2) China is a developing country
The UN has a strict numerical guideline for what is developing and what is developed.
Around 10k GDP is developed and with 2009 GDP at 6600, China will be there in 4 years.
6600 -- 2009
7392 -- 2010 (NOW)
10385 -- 2013
It is going to be very hard to convince the Chinese that they are no longer poor. Thier mindset is locked into being poor and second rate. Just convincing them they are the world's 2nd largest economy will be an uphill task.
They will simply not believe that their economy is larger than Japan's.
In 2009, China's per capita GDP is only US$3600 as compared to $46000 in US. As a whole, China is a poor country, developing country. China has a whole set of problems, from energy/environment to demographics. But everyone faces their own problems ; I am China optimist.
Isnt it less than 35% of the US workers make the median income of $50K per year?
Income level in the US varies a lot from location to location, so average national stats is not reflective of local conditions.
Some things to consider about GDP per capita. Size of population 1.3 billion people vs. 300 Million people in the U.S. This means that the size of China's middle class (per capita) could easily outpace the size of the U.S.'s own middle class as a whole but China as a country would still show up as "poor" and developing.
Some rural farmers and various (large) indigenous tribes are not counted in GDP at all.
I don't know where DCX got his figure of $3,600, but that is simply wrong. PPP is a much more accurate portrayal of the income of a nation.
CIA Factbook, World Bank Factbook and the UN all show China as having a PPP of about $6,600 in 2008-9.
Sadly this is the last thing Americans have to hold on to, that their GDP is larger than China's, even though buying power is much higher in China.
Please check the atlas based (or exchanged based) method, China's per capita GDP is US$3600 in 2009.
Current estimates, 2010-2015: (sorry guys, you have to cut and past the whole line into URL)
By GDP growth estimates, from 2010 to 2015, the US economy will grow by $3.45 T, vs. China's economy will grow by $4 T. The US economy in 2015 is estimated at $18.2 T, vs. China's economy at $9.4T.
By PPP figures, the gap will be closer.
Currently, the per capita income for PRC is estimated at $4,000 by GDP, $6,710 by GNI-PPP, and $7,240 by PPP.
Personally, I would not consider a country to be "developed" until it reaches $12,000-$14,000 GDP per capita. That is the criteria used for Taiwan and S. Korea in the past. China will be halfway there in 2015.
"Please check the atlas based (or exchanged based) method, China's per capita GDP is US$3600 in 2009. "
And if you had looked at the PPP or you had read any of my posts you would know that they are far richer than that figure would tell you. Everything here is far cheaper. A new first car is $4,400, for example. This works out to the rest of the economy also.
Your lifestyle is not 15X greater or better than that of the Chinese, not even close. All most Americans have is debt. Lots and lots of debt.
Who is richer?
Citizen of Country A that has a GDP of $80,000 per year, but each citizen spends $85,000 per year and has 40% debt to income ratio...
Citizen of Country B that has a GDP of $4,000 per year, but each citizen spends $2,400 per year and saves the balance, has no debt, and 2 years income in the bank, saved up?
I'd say probably not. Most people make way less than that..more like $24,000 a year based on regular service jobs. However, if you're a white middle class professional then it should be fairly easy to earn $40,000 right out of college. Plus there's a pretty major wealth gap and the U.S. leads the world in billionaires so that means the average means even less because the numbers are skewed heavily based on that upper tier of wealth which brings up the average.
I know both measures all too well. (I am a MIT trained economist.) A similarly equipped car cost just as much in China, if not more. In 2004, I was in a dealership in Shanghai and a Buick Regal cost an equivalent of US$45,000, while the same car would cost US$30,000 or less in the US. And many real estates in Shanghai/Beijing are more expensive than that of nice neighborhood in NYC. Yes everyday food is cheaper. But brand name products such as Coach and DKNY are far more expensive in China. All I am saying is that PPP is a not necessarily an objective measurement.
Even though I doubt DCX is a MIT trained economist. I do think he's right about this. Quality name brand goods are certainly much more expensive in China. I'm not sure if this is a combination of government luxury tax or corporate policy but even some name brand "Made in China" items are much more expensive in China than in the U.S. With that being said I doubt the ability to buy a Buick Regal or an ipod really effects quality of life as much as clean air, fresh water, and reasonable housing costs. China right now is going through a wild property bubble which prices out a large portion of the population from ever owning. Plus real estate is still a much better deal in the U.S. than China. At least your chances of getting screwed over by a developer or the government are pretty low. In China they can literally decide to knock down your condo and pay you a pittance so they can build a road through the land.
China still has a ways to go to match middle class living standards. However, I do believe in pure numbers their middle class (with a similar GDP per capita) will be as big as the U.S. if not bigger in the next 20 years.
We got an MIT trained economist on the forum? Well I guess to you, the rest of us are just 在關公面前耍大刀 when we write about China's economy and its prospects. Why don't you contribute more about econ, finance, and other investment related topics? A critical part of the happier abroad lifestyle is making enough money to support it and one route is through investing.
I agree with you that PPP per capita GDP and other figures used by governments such as CPI often distort reality or only reflect a portion of it accurately. I spent weeks to months on extended stays in so called cheap countries and have found the only way to avoid spending a lot of money is to live like typical locals. As far as I'm concerned, that means a huge quality of life compromise which may involve spartan accommodation, food I can't stand, slow or no Internet, limited TV, fans instead of A/C, noise, poor medical care, crappy transportation, or lots of filth.
Bigger ticket items such as houses, cars, and electronics often cost more in poor or developing countries than in developed ones. Once you adjust for PPP, the discrepancies of course become even wider. Compare the retail costs of an Sony Vaio laptop or unlocked Apple iPhone in various countries. What about a fully furnished upper end home or condo with all the bells and whistles? And cars of similar quality generally cost less in the US than in poorer countries.
One major issue to keep in mind when comparing life in countries such as the US, Australia, or Canada to that in China or India is the amount of usable land per person. Living space and private property owned have a big impact on ones quality of life. Land and houses are still quite cheap in much of the US. If I went back to my hometown in Illinois, I could buy a couple acres of land and build a decent home just outside of town (to avoid insane property taxes) for $80-200K, spend another $15-25K on a brand new car, and do quite well on $1,500-2,500 per month. My standard of living would actually be pretty high - good water and medical care, clean air and living environment, low crime, reasonable education, decent food, 100s of cable channels and super fast Internet. If I wanted to bring a wife and kid into the picture, cost would go up another $1,000 or so per month assuming the wife was thrifty and managed the house well. Of course, if she got a job, she would more than make this up. And an Illinois residency makes cheap tuition available for the University of Illinois, a high ranking uni in many fields.
Final point on Americans. Yes they tend to borrow a lot but many also have substantial assets. I believe the best indicator of wealth is NW or net worth (total assets including primary residence less total liabilities including mortgages). In 2009, the average US household NW was around $478,260 (Total Household NW of 55 tn divided by 115 mn US households) and the median was around $86,000 (based on various sources). If you focus on richer select groups (say 40 and over with a college degree or above) the median NW shoots way up. For example, most of the friends in my parents social circle (all retirement age living in a hick town) are worth anywhere from US$500K - 20 mn.
Last edited by Rock on August 31st, 2010, 11:56 am, edited 1 time in total.