Business Economics & Services Team (BEST)
China Pips the US. What it Portends?
China has at last piped the US as the largest economy in the world and India continues to be the third largest, retaining a position that she has been maintaining for quite sometime. It is significant to note that the China's supremacy has come after the US reigning for long 142 years at the top slot. But what that has happened now is not the one that has come out of blue. It was largely expected, going by the efforts being made by China to close the ranks with the US. But that was expected by economists only by 2019. Now it has happened much before the expected time.
The recently released data by IMF, points out that in 2014, the Chinese economy will notch at US$ 17.65 trillion, while the US economy will perform a shade lower than that at US$ 17.42 trillion. It was a reversal of the performance of the two countries in 2013. While the US maintained its lead at US$ 16.77 trillion, China came second at US$ 16.15 trillion.
What is significant is that in absolute terms both the economies have grown, but China's growth was more spectacular. What does it mean? There are many points that can be debated upon. One: is the China's spectacular growth sustainable? Two: how does it bring about shifts in the power equations among the comity of nations? Three: will China start asserting its hegemony on the rest of the world?
Clear cut answers for all these questions are near impossible. There are different shades of opinions on these issues. Many feel that it will be a neck to neck race between the US and the China for the number one slot in the coming years since the margin of difference is in decimals. Many applauding the US economy says that the beleaguered economy has long left its financial profligacy and has accepted sound economic principles. That is showing positive results in terms of containing its huge current account balance. That position is going to be consolidated in the coming years. Secondly, many believe that Chinese supremacy in technology is a mere hog wash. Its copy cat nature combined with an opaque system might be hiding many things. One has to go beyond the veil of secrecy to discern what is lying inside.
But China has her own supporters who vouch for its technological supremacy. They quote the examples of Huawei, Haier, Xiaomi etc to drive home its solid technological strength, which is an important indicator to maintain the growth dynamics. Reverse engineering or copy cat syndrome is an abuse hurled upon China now by its detractors. Initially, they must have done that, when investment in R&D was beyond her means. Now its investment in R&D is huge. Many of the large corporations are investing between 10 to 14 percent in R&D. The success models of Huawei and Haier will motivate many more large and small Chinese corporations to invest in R&D.
Now coming to India, which has been holding consistently a third position for long, any vaulting in the pecking order is near impossible at least for the next ten years or so. But India also has a lot to cheer. Way back in 2000, it was ranked as the fourth in the pecking order below Japan, with a economic turnover close to US$ 1 trillion as against Japan's US$ 2.63 trillion. In 2013, India scaled high at US $ 6.78 trillion, while Japan's remained at US$ 4.67 trillion. Come 2014, India has upped its figure to US$ 7.28 trillion ahead of Japan's US$ 4.79 trillion. To push both China and the US to lower slots, India will have to grow at over 10 percent for the next 10 years or so, presuming that both China and the US will grow at a lesser pace on account of their large GDP base. Will it happen before 2050 or beyond that is the trillion dollar question?
China Pips the US. What it Portends?
China has at last piped the US as the largest economy in the world and India continues to be the third largest, retaining a position that she has been maintaining for quite sometime. It is significant to note that the China's supremacy has come after the US reigning for long 142 years at the top slot. But what that has happened now is not the one that has come out of blue. It was largely expected, going by the efforts being made by China to close the ranks with the US. But that was expected by economists only by 2019. Now it has happened much before the expected time.
The recently released data by IMF, points out that in 2014, the Chinese economy will notch at US$ 17.65 trillion, while the US economy will perform a shade lower than that at US$ 17.42 trillion. It was a reversal of the performance of the two countries in 2013. While the US maintained its lead at US$ 16.77 trillion, China came second at US$ 16.15 trillion.
What is significant is that in absolute terms both the economies have grown, but China's growth was more spectacular. What does it mean? There are many points that can be debated upon. One: is the China's spectacular growth sustainable? Two: how does it bring about shifts in the power equations among the comity of nations? Three: will China start asserting its hegemony on the rest of the world?
Clear cut answers for all these questions are near impossible. There are different shades of opinions on these issues. Many feel that it will be a neck to neck race between the US and the China for the number one slot in the coming years since the margin of difference is in decimals. Many applauding the US economy says that the beleaguered economy has long left its financial profligacy and has accepted sound economic principles. That is showing positive results in terms of containing its huge current account balance. That position is going to be consolidated in the coming years. Secondly, many believe that Chinese supremacy in technology is a mere hog wash. Its copy cat nature combined with an opaque system might be hiding many things. One has to go beyond the veil of secrecy to discern what is lying inside.
But China has her own supporters who vouch for its technological supremacy. They quote the examples of Huawei, Haier, Xiaomi etc to drive home its solid technological strength, which is an important indicator to maintain the growth dynamics. Reverse engineering or copy cat syndrome is an abuse hurled upon China now by its detractors. Initially, they must have done that, when investment in R&D was beyond her means. Now its investment in R&D is huge. Many of the large corporations are investing between 10 to 14 percent in R&D. The success models of Huawei and Haier will motivate many more large and small Chinese corporations to invest in R&D.
Now coming to India, which has been holding consistently a third position for long, any vaulting in the pecking order is near impossible at least for the next ten years or so. But India also has a lot to cheer. Way back in 2000, it was ranked as the fourth in the pecking order below Japan, with a economic turnover close to US$ 1 trillion as against Japan's US$ 2.63 trillion. In 2013, India scaled high at US $ 6.78 trillion, while Japan's remained at US$ 4.67 trillion. Come 2014, India has upped its figure to US$ 7.28 trillion ahead of Japan's US$ 4.79 trillion. To push both China and the US to lower slots, India will have to grow at over 10 percent for the next 10 years or so, presuming that both China and the US will grow at a lesser pace on account of their large GDP base. Will it happen before 2050 or beyond that is the trillion dollar question?
