IMF predicts the year China's economy will surpass U.S.
Almaty. April 26. Kazakhstan Today - The U.S. could lose its status as the world's biggest economic power within five years, IMF predicts, Kazakhstan Today reports.
The International Monetary Fund predicts China will overtake the U.S. in 2016, which will effectively end the 'Age of America' a decade before most analysts had expected, the Daily Mail reported.
It means that whoever wins the 2012 presidential election will have the dubious honour of presiding over the fall of the United States.
It is the first time the IMF has put a time frame on the communist country's inevitable march, and the forecast has profound implications for the balance of global power.
The Washington-based fund claims its estimate is based on the comparative purchasing power of the two countries.
The news casts a deepening cloud over the future of the dollar as the world's dominant currency as well as Washington's attempts to close the budget gap and rein in the nation's ballooning debt.
But politicians argue Beijing's technology is lagging behind and much of China lives in poverty. The Asian country also trails way behind the U.S. in output per person.
In 2009 the IMF calculated gross domestic product per head in the U.S. at 28,000 pounds, compared to 2,500 pounds in China.
The IMF seemed almost embarrassed to announce the news, inserting its prediction without fanfare on its website in recent days.
China as strictly enforced price controls and kept the value of its currency, the yuan renminbi (RMB), artificially low.
This has paved the way for the manufacture and export of goods at irresistibly low prices. The 'Made In China' label has become synonymous with remarkably affordable products - even if the quality and ethics remain questionable.
Ironically, one of the biggest consumers of these products is the U.S. - simultaneously bulking up China's economy while starving its own, and delivering the purchasing power of the world's largest economy to its main rival.
China has been accelerating towards the U.S. with remarkable speed. Just 10 years ago, the U.S. economy was three times that of China's.
It's a staggering statistic, even when taking into account the fact that the U.S. economy has been dropping down to meet China's meteoric rise.
The 2016 date has taken many analysts by surprise, many of whom were optimistic that America could hold out until the later part of the 2020s.
But Brett Arends writes in the Wall Street Journal that many have been looking at the wrong criteria when judging the prospects of both countries.
He said analysts were comparing China's gross domestic product (GDP) against that of the U.S. - 'a largely meaningless comparison in real terms'.
Instead, IMF analysts compared the difference in 'purchasing power parities' - what people earn and spend in their respective domestic markets.
Using this criteria, they found that the Chinese economy would grow from $11.2 trillion in 2011 to $19 trillion in 2016.
Over the same period, the U.S. economy will rise from a dominant $15.2 trillion to a trailing $18.8 trillion.
Photo: Daily Mail
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