For those who fear China’s inexorable rise, economic data published this week bring little comfort. The International Comparison Program hosted by the World Bank has updated gross domestic product in purchasing power parity terms to show that China will this year overtake the US to become the world’s largest economy.
Many economists had assumed the great “sorpasso” (perhaps more properly the “chaoyue”) between the two main economies would happen in 2019. But by updating the costs of goods and services, economists have narrowed the gap significantly. These changes suggest the era of global American economic dominance that began in the 1870s is all but over.
China’s economic miracle continues to astound. Since 2000, annual growth rates averaging 10 per cent have raised the GDP fourfold. The wonders of compound growth meant that China was always going to overtake the slower-growing US. China is the world’s supplier of cheap goods, taking the global lead in trade from the US last year. The renminbi is the seventh most used currency and in 2013 China was sitting pretty on a current account surplus of about $200bn, compared with a US deficit of roughly $400bn.