China to Trounce U.S. in Next Decade
(National Interest) -- by Martin Jacques --
The Western financial crisis heralded a significant shift in the balance of power between the United States and China. Most starkly, it brought forward the date when the Chinese economy will overtake the US economy in size from 2027 (the Goldman Sachs projection in 2005) to 2020. The reason is simple: while the US economy is around the same size as it was in 2008, with the prospect of perhaps a decade of very weak growth ahead, the Chinese economy has continued to grow at around 9 percent and future economic growth is likely to be in the region of 8 percent. While 2027 sounded sufficiently far in the future to sound speculative, 2020, in contrast, is less than a decade away and feels much more like an extension of the present. The rise of China and the decline of the United States is becoming more tangible by the year.
Significant landmarks are happening thick and fast: in 2010, China overtook Germany to become the world’s largest exporter; in the same year it overtook Japan to become the world’s second-largest economy; at the beginning of 2011, it overtook the United States to become the world’s largest manufacturing nation, a position the United States had held for 110 years; in 2020, if not earlier, it will overtake the United States to become the world’s largest economy; and perhaps not too long afterwards, when the renminbi is finally made convertible, the latter will replace the dollar as the world’s leading reserve currency. With each landmark we move a little further away from a world shaped by the United States and toward one shaped by China.
There has been a strong tendency in the West to see this world in narrowly economic terms, with China assuming similar characteristics as the United States during the process of its rise and the global furniture that we are familiar with remaining little changed. This is to greatly underestimate the nature and import of China’s rise. It will not even be true economically. When China overtakes the United States, it will still be both a developed and a developing economy; it will continue to be a huge trading nation, on a far greater scale than the United States; and it will be far more orientated towards the developing world, to which it presently sends over half its exports, than Washington has been.
Nor will the international financial system remain more or less unchanged. The only way that the IMF and the World Bank will survive China’s rise to economic ascendancy is if they come to reflect the new configuration of global economic power: in other words, if, in time, China comes to call the shots in the IMF. But even in this eventuality, it is entirely possible that the IMF will be effectively replaced by a different kind of body, one more in line with Chinese interests and aspirations, along with those of other developing countries like India. In this context, it should be noted that already, in 2009-10, the China Development Bank and the China Exim Bank between them lent more to the developing world than the World Bank, which suggests that the latter could, within a decade or so, become increasingly marginalized. Then factor in the renminbi as the dominant world currency, with Shanghai replacing New York as the global financial centre, and we are clearly looking at a very different world economic order...MORE...LINK