Economic Showdown: US vs. China, Will China Overtake the US? An Economic Analysis, today news

Is America Doomed to Economically be Surpassed by China?

The United States of America can be considered the global economic leader, backed by a powerful military, for almost a century now. Nevertheless, current trends indicate that this status can be compromised, especially by China that became the second largest economy in the world. This paper aims to discuss the contemporary economy, the interaction of the US and Chinese economies, and China’s likelihood to overtake America in the near future.

The Economic Power Shift

There is much debate over which country can be considered the richest; however, it is a well-known fact that for many years the United States of America has been considered to be on the top of the economic list. Nevertheless, as of now, the US has a number of issues listed below that threaten to diminish the country’s position as the No.1 economy in the world. This evaluation brings us to the post World War II period when the US economy was still dominating the world economy with roughly representing half of the world’s economy. Today, that number has lowered down but it is not the indication that perhaps another country has surpassed it.

China’s Rapid Rise

Over the past several years, several countries tried to match it, but none got closer to the US than China. Presently, the American economy is estimated to be about $28 trillion, while the Chinese one is approximately $18 trillion. According to the Centre for Economics and Business Research (CEBR), such predictions stated that China might surpass the US and become the world’s largest economy within the year 2028. However, they have recently updated this forecast, possibly indicating that this transition is not going to be realised until a later date of 2036.

urchasing Power Parity

Among the barometers that are used to gauge the economies’ prowess, one of the most common is Purchasing Power Parity (PPP). Most level three key performance indicators experts argue that China has surpassed the US on this parameter some time back, probably around the year 2010. Thus, unique to China, the real value of the yuan is actually slightly higher as compared to the US dollar. For instance, if you have $10 in the US you might be able to afford a single burger while across the globe, here in China, you can afford two burgers of the same quality as those in the US.

Protectionism and other forms of trading strategies.

America’s insecurity about China economically has resulted in assertiveness from the superpowers especially under the Trump administration, more so, through declaring a trade war against Chinese products. In July 2018, he increased levies on $50 billion worth of Chinese goods to 25% marking the start of economic clash. Symbolically, Trump spoke of economic wars as still being positive in nature and stating they are easier to pursue.

Effect on Chinese companies

Huawei a rapidly growing Chinese telecommunications firm suffering from the impact of this trade war was one of the most significant victims. The US not only restricted Huawei from its markets but also ensured that all its allies did the same which tremendously affected its globalization. Thus, despite Huawei continues its functioning, its development rate is less than before the occurrence of crises in relation to it.

Challenges for TikTok

Another major Chinese company, is TikTok, which has also been scrutinized, albeit not as heavily as Huawei has been intervened with. The above case is a perfect example of conflict that is being experienced in the alteration between the United States and China in the commerce relations where technology companies are in the middle of the conflict.

Purchasing Power Parity

Among the barometers that are used to gauge the economies’ prowess, one of the most common is Purchasing Power Parity (PPP). Most level three key performance indicators experts argue that China has surpassed the US on this parameter some time back, probably around the year 2010. Thus, unique to China, the real value of the yuan is actually slightly higher as compared to the US dollar. For instance, if you have $10 in the US you might be able to afford a single burger while across the globe, here in China, you can afford two burgers of the same quality as those in the US.

Protectionism and other forms of trading strategies.

America’s insecurity about China economically has resulted in assertiveness from the superpowers especially under the Trump administration, more so, through declaring a trade war against Chinese products. In July 2018, he increased levies on $50 billion worth of Chinese goods to 25% marking the start of economic clash. Symbolically, Trump spoke of economic wars as still being positive in nature and stating they are easier to pursue.

Effect on Chinese companies

Huawei a rapidly growing Chinese telecommunications firm suffering from the impact of this trade war was one of the most significant victims. The US not only restricted Huawei from its markets but also ensured that all its allies did the same which tremendously affected its globalization. Thus, despite Huawei continues its functioning, its development rate is less than before the occurrence of crises in relation to it.

Challenges for TikTok

Another major Chinese company, is TikTok, which has also been scrutinized, albeit not as heavily as Huawei has been intervened with. The above case is a perfect example of conflict that is being experienced in the alteration between the United States and China in the commerce relations where technology companies are in the middle of the conflict.

China's Economic Growth Rate

From 1978 to 2005, China achieved a near perfect annual growth rate of 9.91 percent. This period corresponds with the American wars in Afghanistan, and Iraq in particular. However, the annual economic growth in China is about a 5 percent per year compared to the earlier high rates. Nevertheless, $18 trillion economic growth rate at 5 percent is still a huge number stronger compared to the growth rate of developed economies such as the US with a growth rate that ranges between 1-3 percent.

Implications of growth rates in the theory

Many economists using basic reasoning from export led growth theory opined that economy that is expanding at 7% per annum could mean that this country doubles its economy within a decade. This implies that within the same period it can grow to a $40 trillion economy from a $20 trillion economy. Thus, even when the Chinese growth rate is diminished, the growth itself is still staggering.

The Dollar's Dominance

This is largely so because the US dollar is the global currency besides the fact that a great portion of the America’s GDP is accounted for by the export of its goods and services. Virtually all countries in the world that engage in the business of international trade, do so with the US dollar, and this gives the US a special control on the world economy. China also use dollars in international trade and holds over $3 trillion. Of that figure, $2 trillion worth of US dollar reserves, The increase in Forex reserves has now risen to 48 percent, They currently hold $2 trillion in US dollar reserves.

That is, the following will be the challenges ahead for China:

However, there are the following issues which china is facing even though it has achieved a lot in economic aspect. Since the beginning of the trade war, there are factors that may pose threats to China’s future growth. Also, there are internal challenges which are special for China: aged non-replacing population and increasing credit statistics.

Looking Towards the Future

Thus, the question whether China can overcome America economically in the future will remain a question. The globalization of the economy suggests that at the current rate, there will be a switch of power from the emerging nations to the developed world but events in the global economics and geopolitics will decide this.

Conclusion

Speaking of the economic relations, the US and China have become the main competitors of the 21st century. By now everyone is closely observing and waiting to see how a fast-rising country like China, is going to displace a traditional super power like the United States of America. It is quite obvious that the future state and development of international trade economics will largely depend on the relations between existing trade policies, further economic scenarios, and ongoing shifts on the international level.

In brief, the phenomenon of China’s challenge to the US is evident but at the same time, international economy is an elaborate system. Whether China will eventually achieve the status of having the world’s largest economy remains to be seen; however, the quest has begun.