Pages

October 13, 2008

Credit Crisis Updated Projection of When China's GDP passes the USA

Some people online say that China passing the USA in GDP is a wild dream. One posted analysis is from the Futurist, Stephen Aguilar-Millan.

UPDATE:
This site has a historical analysis of the actual reported GDP numbers from 2000 to 2008 for China, USA and Japan. The Futurist had 2005 GDP numbers instead of 2007 numbers. Thus their projections from that one datapoint were two years pessimistic because of that error. [Along with the other major error of ignoring exchange rate.]
END UPDATE

What Stephen ignored entirely is "what is the projected exchange rate between the Chinese currency and the US currency?"

The exchange is critical as one could see by looking at the combined GDP of the countries of Europe and the exchange rate of the Euro. In 2001, the euro ranged between 0.838 and 0.95 US dollars for one euro. In 2008, the euro ranged between 1.34 and 1.6 US dollars for one euro. The european countries had an average GDP growth rate that was lower than the United States.

Currently the combined GDP of the EU countries is higher than the GDP of the United States. According to the IMF and the CIA the EU has 20% more GDP than the USA.

The combined GDP of the EU countries was less than the USA's GDP in 2000 and 2001. The EU had about 85% of the US GDP.

The historical exchange rate of the japanese yen is also a critical example. The Japanese yen has appreciated by almost 400% since 1970. This is a huge part of what moved Japan into being the second largest economy based on GDP.

All emerging countries that catch up with overall and per capita GDP experience this strengthening of their currency.

The Economist magazine noted that China's national economic figures have been inaccurate but that the provincial numbers which show 10% higher growth have historically been shown to be more correct. The Futurist (Stephen Aguilar-Millan) uses the one 2007 GDP data point for his analysis. There is a new economic census being performed in China. The last economic census five years ago resulted in a 17% increased restatement of China's GDP.

Stephen Green, an economist at Standard Chartered, calculates that in 2007 the combined output of the provinces was 10% more than that reported by Beijing. Their average growth rate of 13.1% was also still 1.2 percentage points higher than the revised national growth rate, although the gap has narrowed from almost three points in 2005.


A compounded 1.2% annual adjustment would be a 6-7% increased GDP restatement.






Year GDP(yuan) GDP growth Yuan per USD China GDP China+HK/Ma US GDP
2007 24.66 11.9 7.3 3.38 3.7 13.8
2008 27.0 9.6 6.75 4.0 4.27 14.3 Past Germany
2009 29.6 9.0 6.2 4.8 5.04 14.3
2010 32.3 10.0 5.6 5.8 6.04 14.4 Past Japan
2011 35.5 9.5 5.1 7.0 7.25 14.7
2012 38.9 9.5 4.7 8.2 8.50 15.2
2013 42.5 9.5 4.5 9.5 9.87 15.6
2014 46.6 9.0 4.2 11.1 11.46 16.1
2015 50.8 9.0 3.9 12.9 13.25 16.6
2016 55.3 8.0 3.7 14.9 15.32 17.1
2017 59.8 7.5 3.6 16.8 17.21 17.6
2018 64.3 7.0 3.4 18.8 19.24 18.1 Past the USA

2019 68.8 7.0 3.3 21.0 21.42 18.7
2020 73.6 7.0 3.1 23.4 23.85 19.2
2021 78.7 6.0 3.1 25.5 26.02 19.8
2022 83.4 6.0 3.0 27.6 28.13 20.4
2023 88.4 5.0 3.0 29.9 30.41 21.0
2024 92.9 5.0 2.9 32.0 32.57 21.6
2025 97.5 5.0 2.8 34.3 34.88 22.3
2026 102.4 5.0 2.8 36.7 37.36 22.9
2027 107.5 5.0 2.7 39.4 40.02 23.6
2028 112.9 5.0 2.7 42.2 42.86 24.3
2029 118.5 5.0 2.6 45.2 45.91 25.1
2030 124.5 5.0 2.6 48.4 49.17 25.8 Close to double the USA


FURTHER READING
The second quarter of 2008 has bea.gov reporting 14.3 trillion for US GDP.

China's yuan denominated GDP is about 27 trillion yuan which with current exchange rates is about US$3.95 trillion (without including Hong Kong and Macau's GDP).
blog comments powered by Disqus