Based on official estimates of China’s economic growth, it supposedly has overtaken Japan in the 2nd quarter of this year, becoming the 2nd-largest economy in the world after the US. Some “experts” suggest that China might overtake the US & become the biggest economy as early as 2030.
In the first instance, I am skeptical that China has overtaken Japan, in a meaningful sense. After all, GDP is a bogus measure of economic activity & China is in the midst of a massive bubble afflicting its entire economy, driven by loose monetary policy by most central banks in the world! In all events, the numbers are provided by an authoritarian government whose data collection & calculation is far from transparent.
Secondly, it will be virtually impossible for China’s per capita GDP to match that of the US within 20 years. This will not happen even though US economic policy is diverted from supporting economic growth toward greater redistribution under the Obama administration.
Thirdly, Chinese authorities insist that “real” economic growth has been close to double-digits for nearly 2 decades. During that period, measured price inflation has often been close to double digits. Does anyone really believe that any economy can have a 20% nominal growth rate for such a long period.
Hey guys, a reality check is in order.
And just think about the boastful claims of China’s $2.45 trillion foreign exchange reserve balances. Having a dollar fetish is like the gold bullion fetish of European absolute monarchies that followed the same sort of export-led growth policies as does Beijing.
These reserves are driven in large part with an obsession with under-valuing the reminbi. In turn, China is selling exports at artificially-low prices & paying artificially-high prices for imports!
And then, they are mostly used to buy US Treasuries that pay risibly-low interest rates.
BTW. look for a big & bad surprise when China’s property bubble blows up in Beijing’s face. It will not be pretty!!!