Bellerbys Economics - Mr Stephenson

Thursday, October 25, 2007

China Moves into Third Place

By some estimates, China will move into third place in terms of world GDP by the end of November when it overtakes Germany. It's already in second place in terms of PPP. Economic growth in China is 11.5% - higher than the Government's target of 10%. Economic growth of 11.5% means the economy is doubling in size about once every six years - in other words, if it continues at the current rate, the average Chinese person will be four times richer just twelve years from now.

But not everything is rosy in China at the moment - inflation of 6.2% is a big problem, brought about by a fall in supply of pigs through blue tongue disease and increased consumption, initially prompted by the Government itself when it promoted a 'two legs, not one' policy this time last year in an effort to move away from over-dependence on exports. But the fall in the value of the yuan - with its continuing link to the dollar - has in fact made exports even cheaper, fuelling surging demand in that area too.

A combination of growing interest rates, increased pork production and a rise in the exchange rate should see the overheating and inflation ease off in the next year. Certainly, the Chinese economists steering the economic miracle, such as Li Xiaochao, seem to have the problems firmly in their sights. The supply-side is likely to continue to be the engine for China's growth with China still being the best place to invest for manufacturing economies. For the first time ever, China contributed more to world economic growth last year than the United States - and it will be the same this year.

GDP - end of 2006 - $tr

1 United States 13,201,819
2 Japan 4,340,133
3 Germany 2,906,681
4 China 2,668,071
5 United Kingdom 2,345,015
6 France 2,230,721
7 Italy 1,844,749
8 Canada 1,251,463
9 Spain 1,223,988
10 Brazil 1,067,962



PPP - End of 2006 $tr

1 United States 13,060,000
2 People's Republic of China 10,210,000
3 Japan 4,218,000
4 India 4,164,000
5 Germany 2,632,000
6 United Kingdom 1,928,000
7 France 1,902,000
8 Italy 1,756,000
9 Russia 1,746,000
10 Brazil 1,655,000

2 Comments:

  • If in two months RMB can "run win " Euro that Chinese economic can exceed Germany this year. According to the marketplace at present anticipating that, RMB adds the annual inner of U. S. dollar will appreciate at least above 1%, but Euro add U. S. dollar is at present very difficult to say.

    By Blogger chenpeifang, at 12:59 am  

  • I think we are seeing inflationary pressure growth througout the globe attributing to exhaustion of 'Chineese effect' as China itself is suffering high level of inflation.

    By Blogger LSE, at 12:19 am  

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