As the chinese economic growth continues at a frenetic pace that has last nearly a decade already, the IMF has released a surprising report . According to IMF the year when China surpasses the U.S. economy will be 2016 signifying the end of the "Age of America".
The IMF in its analysis looks beyond exchange rates to the true, real terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and is rising.
Just 10 years ago, the U.S. economy was three times the size of China's.
This is more than a statistical story. It is the end of the Age of America. As a bond strategist in Europe told me two weeks ago, “We are witnessing the end of America’s economic hegemony.”