Thursday, May 30, 2013

China Overtake U.S Economy?

China is the second leader of in the world. With the recent decades of surging progress from China, many believe that they could be running out of steam. The government may even be slowing the natural expansion as they are trying to dial down the speed of expansion, in hopes that they can avoid a boom-bust cycle that most of the western nations are trapped in. With aims of a moderate 7 percent growth, the explosive expansion, through limiting the possible investment, may be winding down on purpose. But other argue that the economic engine is just running out of juice and that the government's attempts at reducing the growth rates to moderate levels are just a guise.

 The data may also be altered to help with the perceived confidence in the business communities. Although the growth data is calculated from the standard sources, there have been rumors that the companies, such as the utilities companies, are asked to massage the numbers. The overall consensus is that the data may be inflated by as much as 10 percent.

Even with these overstated data points, most economists and analysts close to the Chinese economy believe that the growth will crash, and then level off between 3 to 4 percent over the next few decades. With these lowered growth estimates, it is important to note that even as the US is in recovery mode it's rate of growth is still under 3 percent- the lower end of China's eventual stabilized growth figures.

In 2012, the GDP comparisons of China and the US, when adjusted for currency exchange, had China at about 75% of the US's purchasing power. Upon further analysis, some of the environmental economist point to the fact that much of the Chinese GDP is still based on liabilities that will need to be changed and upgraded over the coming years, and adjust the relative purchasing power to a figure that is under 50%. With these statistics in mind there are many that believe China won't surpass the US this century.

The US debt crisis is still being felt, but many people, including George Soros, believe that China's state banking system is poised for a similar bust. These claims can be further supported when you look at the amount of credit that China has been issuing, with a jump of more than 100 percent in the last four years; about $11 trillion-which is the size of the entire US banking system.

With all of these figure in mind most people believe that China, although it is still going to outpace the US in growth, probably won't pass the US, at least in the immediate future.

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