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  • Tangent: Economist: China to become world’s largest economy by end-2014. Will USA react to being overtaken similar to Japan?

    Posted by Dr. ARUDOU, Debito on May 27th, 2014

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    Hi Blog.  Bit of a tangent here, but when we saw Japan drop behind China to become the #3 largest economy, we saw reactions of craziness that still reverberate today (not the least sour grapes, but more heightened security issues).  I wonder how the Americans will react to this news.

    The Economist (London) tells us like it is, with the aplomb of a former world power itself, declaring the American Century over.  China will be the world’s largest economy years at the end of this year, nearly half a decade ahead of schedule.

    Myself, I think this is (or should be) inevitable:  China has the most people, so it stands to reason that it should have the most capacity to produce and be rich if not richest.  After all, the Pax Americana Postwar goal of helping countries become rich and developed is that they’ll become more stable economically, thus more likely to suppress warlike urges in favor of the mutual profit motive.  Plus the Americans always held out hope that an emerging middle class would agitate for democratic reforms, and shudder at the thought of the Chinese system in its current form becoming the global hegemon.  Will it react similar to Japan and see China as a threat, or will it keep Postwar historical goals in perspective and see it as a form of mission accomplished?

    Yet China, as the second article below indicates, is downplaying that kind of future.  Although global development theories are something I studied in grad school, China isn’t my field.  So Debito.org Readers. any thoughts as to why?  Dr. ARUDOU, Debito

    /////////////////////////////////////////////////

    Daily chart
    Crowning the dragon
    The Economist, Apr 30th 2014 by J.M.F. and L.P.
    China will become the world’s largest economy by the end of the year
    http://www.economist.com/blogs/graphicdetail/2014/04/daily-chart-19?fsrc=scn/tw/te/pe/ed/dailychartppp

    UNTIL 1890 China was the world’s largest economy, before America surpassed it. By the end of 2014 China is on track to reclaim its crown. Comparing economic output is tricky: exchange rates get in the way. Simply converting GDP from renminbi to dollars at market rates may not reflect the true cost of living. Bread and beer may be cheaper in one country than another, for example. To account for these differences, economists make adjustments based on a comparable basket of goods and services across the globe, so-called purchasing-power parity (PPP). New data released on April 30th from the International Comparison Programme, a part of the UN, calculated the cost of living in 199 countries in 2011. On this basis, China’s PPP exchange rate is now higher than economists had previously estimated using data from the previous survey in 2005: a whopping 20% higher. So China, which had been forecast to overtake America in 2019 by the IMF, will be crowned the world’s pre-eminent country by the end of this year according to The Economist’s calculations. The American Century ends, and the Pacific Century begins.

    /////////////////////////////////////////////////

    China doesn’t want to be recognized as such:

    http://www.japantimes.co.jp/opinion/2014/05/18/commentary/world-commentary/china-plays-down-gdp-size/

    China plays down GDP size
    BY FRANK CHING
    THE JAPAN TIMES, MAY 18, 2014

    More than a week after new World Bank figures indicated that China would overtake the United States this year and become the No. 1 economy comes the news that, for the first time, the world’s three biggest public companies and five of the top 10 in the Forbes Global 2000 List are Chinese.

    American companies accounted for the remaining five on the top 10 list. The biggest U.S. companies were JPMorgan Chase and Berkshire Hathaway, in fourth and fifth place respectively, trailing Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China.

    There are no European companies among the top 10. Royal Dutch Shell and HSBC Holdings, among the top 10 last year, have been edged out.

    Xinhua, the official Chinese press agency, reported the news without comment under the headline “China has world’s 3 largest companies: Forbes.”

    This was unlike the treatment given to the report the previous week that China would become the world’s largest economy this year. Then, the news was played down, if reported at all.

    In fact, the official People’s Daily newspaper made clear the disdain with which the Chinese government held predictions using purchasing power parity by declaring, “Chinese want a better life, not an artificial ranking as world’s no. 1 economy.”

    It cited “another report from the World Bank” that “indicated that the GDP of the U.S. was about $16.8 trillion in 2013, ranking first, while China’s GDP was only $9.18 trillion, ranking second.” It then put things in better perspective by saying: “China’s per capita GDP ranks only 99th in the world.”

    Clearly China not was comfortable about its elevation to the world’s No. 1 economy by the end of this year. Being in second place is more comfortable and can be used by the government to urge the Chinese people to work harder.

    The People’s Daily recalled that “catching up with the United States” was once stated as the goal of the Chinese people. But it added pointedly, “this meant not only the pursuit of economic strength but also a strong demand for self-esteem and self-confidence.”

    Rest of the article at http://www.japantimes.co.jp/opinion/2014/05/18/commentary/world-commentary/china-plays-down-gdp-size/
    ENDS

    11 Responses to “Tangent: Economist: China to become world’s largest economy by end-2014. Will USA react to being overtaken similar to Japan?”

    1. 名無し Says:

      As an American myself, I really could care less. China is currently what Japan was in the 80′s. It’s riding high but will likely burst a bubble at some point.

    2. Don MacLaren Says:

      Having lived in China for nearly four years now, I’d say there’s nothing to worry about as far as the Chinese economy goes. I don’t really see China as a threat (not for a LONG time anyway)…As far as the Chinese (I talk with) are concerned the biggest issue/thorn in the side of US-Chinese relations is the US’ relationship with Japan…The Chinese are EXTREMELY grateful for the help the US gave them in defeating Japan in WWII, but disappointed that the US now has a defense treaty with Japan. The Chinese see THAT as a threat.

    3. B Says:

      I agree with the above two, to an extent. Yes, this is a milestone, but China has so many immense social and political problems right now, that it isn’t going to take over the US in many other regards just yet at all. I’ve been in China half a dozen times, and “still not even close” describes a lot of aspects to the Chinese social and political structure. There are problems, lots of problems, and China is more fragile than it appears in regards to its economy as well. There has been talk of a bubble in housing for a long time, and the income gap is horrendous.

      Yes, China is rising and may overtake the US in regards to this economic measurement, but in most other areas it “still isn’t even close.”

      (Don’t take this as discounting the influence and power of China, only to try to put this aspect in context a bit)

    4. Jim Di Griz Says:

      My ’50 cents’ worth (see what I did there?);

      America should view China’s economic success as a victory (as Dr. D states above) in much the same way that free-market capitalism allowed the West to bankrupt the USSR by engaging them in an expensive arms-race (regardless of how you feel about cold war spending, this was indeed how the end of the USSR was rationalized by US conservative thinkers).

      Whilst I am sure that there are indeed many blue-collar Americans who begrudge Chinese manufacturing for taking away their jobs (and get misty eyed collective amnesia about ‘good old fashioned American *quality* V’s cheap, badly made Chinese rubbish’, BTW, where are your Levis made?) and I even remember Donald Trump on TV saying ‘We’re giving this country away! China’s raping us!’, I feel certain that the vast majority of Americans will see this as an economic issue (maybe even an opportunity?).

      American ideas of identity being (even now) rooted in the concepts of ‘frontier spirit’, ‘opening up the wilderness and carving out a home’, and even, yes, ‘log cabin to Whitehouse’, are reflected in the modern incarnation of the American Dream; You can come to America with nothing, and make something of yourself!

      You may laugh, but whether the American Dream is for real or not, the perception of it as real is alive, which is why America is such an attractive place for immigrants.

      Contrast the American Dream with the basis of Japanese identity myths;
      ‘We Japanese are one people, race, speaking one language, with unspoken but heartfelt understanding of other Japanese, connected to nature and the land in a way that no other nation could be. We are the most advanced culture in Asia/the world, due to our ‘unique’ qualities that defy verbal expression, and as such, superior people’.

      See the contrast? The American Dream offers a fair reward for your hard work. The Japanese have an identity based on entitlement, a hangover from Imperialist ‘divine right’.

      The rise of China undoubtably will make many Americans question the basis of their American identity; Is America still the land of opportunity and freedom?

      The rise of China is in direct opposition to Japanese myths of their own identity; China is stealing technology! China is a bully! China is spreading false propaganda about us in the world! China wants to take our land (of course)!

    5. Edward J. Cunningham Says:

      @Jim Di Griz

      There’s also another thing about the difference between the American Dream and the idea of Japanese identity. In America, if you don’t belong to the majority’s race or ethnicity, you still have the chance to not only achieve success but be accepted as an American. In Japan, the message is that if you are not a member of the Yamatu race, neither you, your kids, nor your grandkids will ever be accepted as “real” Japanese. Which is why instead of sensibly looking for the nearest place to get workers, Japan’s first instinct was to go all the way to Brazil to specifically look for Brazilians of Japanese ancestry. If they can’t get those, they try to isolate the gaijin workers they do get and kick them out as soon as they are not needed.

    6. dude Says:

      Don MacLaren – The only possible way the U.S./Japan defense treaty could be viewed as a threat is if China has an armed conflict with Japan, and the U.S. enters to support Japan.

    7. Baud Says:

      Having lived in China, as well as HK (merely a different shade of grey mixed with Sex and the City wannabes), I have to say that despite their “wealth”, you divided that by a billion you still have lots of people living in poverty.
      Large swatches of China, even Shanghai and Beijing etc, are frankly, a dump. Even the so called “middle class” often have poor hygiene, poor health (due to pollution issues in China), poor quality of products (because all they care about is how CHEAP something is, and then it falls apart one day later) and poor taste. A saying in HK (though I find this ironic) about mainland China is “They are so poor, all they have is money”, though this is rather pot and kettle. Of course, you could say that about the USA as they have a wealth gap too.

      I think the true measurement of wealth and power is more than just the size of the market/population. The quality of life index is a better indicator, so the Nordic countries etc tend to provide superior standards of living for their citizens, whom they actually seem to care about!

      One thing I will say for the Japanese (market) vis a vis China- the Japanese care about quality and all the Chinese care about is PRICE. I will never forget trying to sell something to Japanese restaurants in the 80s only to be turned down with “we do not care if its cheaper, the quality is the most important thing”.

      I certainly cannot say the same for the Chinese. In fact a Hong Konger recently screwed up my project by jumping in and trying to “do me a favor” by getting a discount from someone she knew.
      In actual fact, this meant the quality became poorer. She then absconded from the project. I had to go back to the supplier and say “please forget what she said, charge me the full price, I want quality” but they just DID NOT GET IT.

      You get what you pay for.

    8. Dean Says:

      “Don MacLaren – The only possible way the U.S./Japan defense treaty could be viewed as a threat is if China has an armed conflict with Japan, and the U.S. enters to support Japan.”

      And its exactly what the U.S. doesnt want, but Ishihara and friends do. Actually, I think Ishihara has been rethinking his position.

    9. Joseph Says:

      Japan simply can not fathom being a second rate country. They want to limit immigration with a declining birth rate, and still maintain the same levels of economic output.

      A declining birthrate/population/top heavy demographics/no immigration and economic output levels are mutually exclusive. For some reason many Japanese live in La La land and believe that they can still be an important country with less than 60 million people.

      The real question shouldn’t be whether or not Japan can deal with being less important in the world. It should be whether or not the crazies try to take over like they did in the 1930′s.

    10. Baudrillard Says:

      This isnt sour grapes (breath?) or anything, but this article, while kind of highlighting China’s rise, also shows that 80% of the country has health or hygiene problems,
      http://www.theguardian.com/world/2009/aug/03/china-astronaut-search-bad-breath

      the environment doesnt help
      http://www.scmp.com/news/hong-kong/article/1522257/hazardous-level-trace-metals-chinas-air-warn-scientists

      China may have been the world’s largest economy up to 1890, but even then it was backward and corrupt- the Ching were still ruling an essentially medieval/feudal country. Of course China has come a long way since then, but I dont think one could describe the majority of China’s population as middle class at all-unlike Japan (even if these are only perceived middle class values, people aspire to them and maintain an essentially middle class lifestyle).

      Even Hong Kong seems overwhelmingly blue collar outside the banks and financial center.

    11. john k Says:

      There is a good summary by several Chinese media given on the BBC* abouts Abe’s visit to Australia:

      “..Media analyse regional politics as Japan and Australia forge closer ties, with some accusing Tokyo of trying to acquire allies in order to isolate Beijing…”

      and good summary by the People’s Daily

      “..”Japan, who refuses to repent, is putting on a show again. In Australia Mr Abe delivered a speech and hypocritically vowed never to repeat history. Such a stunt to win support and earn sympathy will never change the fact that Japan remains unrepentant,” the paper exclaims…”

      I wonder if this is also the view taken in Australia’s media?…judging by the few i’ve read, nope. Abbott is looking to strengthen economic ties and submarines technology transfer, that’s about all. I would have thought there would be more analysis by the Oz media..

      * http://www.bbc.com/news/world-asia-china-28241900

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