Planting $ for tomorrow

Ultimate Economic Showdown: China vs. the U.S.

China is one of the main growth stories of our time. So is Technology. In the late 90s everyone was excited about technology as they have been about the growth of the BRIC countries, and especially China. Technology is still booming, but the market and irrational exuberrance has quieted. China's economy will continue to grow even now that its stock is down to attractive valuations.

Like the Wall Street Journal article said China wants a seat at the regulatory table. There economy certainly buys them a seat at the table. Will they be the dominant economic force. Maybe in your lifetime James, but not in the near future.

Listed here is the GDP by country as found in the World Bank website.

Gross domestic product 2007
(millions of
Ranking Economy US dollars)

1 United States 13,811,200
2 Japan 4,376,705
3 Germany 3,297,233
4 China 3,280,053
5 United Kingdom 2,727,806
6 France 2,562,288
7 Italy 2,107,481
8 Spain 1,429,226
9 Canada 1,326,376
10 Brazil 1,314,170
11 Russian Federation 1,291,011
12 India 1,170,968


In 2006 I was amazed that China had moved to fourth place by beating out Germany. This year the U.K. and Germany switched places. China only needs to double a little more than twice to catch up with the U.S. Using the rule of 72, if China grows its GDP by 10% per year then they will double approximately every 7.2 years. They could double from $3.28 Trillion to $6.56T by 2014, and on to $13.12T by half way through 2021. This means they would almost catch up with the U.S. if the U.S. completely stoped growing for the next 14.4 years. More likely the U.S. grows at more like 2.5% a year. Of course 2.5% of the U.S. GDP is $345B and 10% of China's GDP is $328B, so it would take longer than 14 years at these growth rates. Most prominent economists do think China will pass the U.S. this century. The very aggresive estimates are around 20 years. To say it will happen when we recover from the current crisis is extremly aggresive. Of course a lot can change in the next 50 years or so.

Information technology is ushering in a new world order, but the excited investors 10 years ago were early. What they foretold is still taking its time to play out. So to with China.