Can China overtake the US in GDP Nominal before the end of this decade? A Thread...

[hkbc]

I respectfully disagree. A bigger GDP would mean more military spending per percentage of GDP. America would need to increase its defence spending to maintain its lead over China.

There is a double standard when it comes to GDP, PPP and defence spending comparisons

The US naturally wants to use nominal GDP numbers for GDP because if PPP was used China's GDP would dwarf the US, however, both Chinese and American defence expenditures are almost entirely spent domestically which would mean PPP figures are a much better basis of comparison, it also helps the hawks in the US bump up the value of the Chinese defence budget by 33%, but to do that would mean to tacitly admit they aren't the biggest economy in the World and China has already over taken them, which is political taboo!

Besides as things stand the US spends over 2 times what China spends on defence, on a percentage of nominal GDP basis so plenty of room to grow and here's the rub if China was to spend the same proportion of its GDP as the US on defence, at PPP, it would actually be about 40 billion USD more than the US.

The 'fight' may already be lost it just serves the interests of both sides not to talk about it!

Therefore like so many things in the world of today, Joe 'not on my watch' Biden's administration will just carry on with the see no evil, hear no evil, speak no evil fudging!

 

[Abominable]

And how is nominal GDP more relevant than real GDP for any of those cases?

Dollar status as reserve currency would not suddenly be threatened by some number on paper, and how is UN contribution tied to GDP?

UN scale of assessment. It's based on a number of factors but for developed countries basically ties contributions to GDP.

GDP isn't just a number on a paper though is it? It's economic output. A big reason why the dollar is so popular is because of America's dominant GDP.

It's not the only factor of course.

 

[FriedRiceNSpice]

UN scale of assessment. It's based on a number of factors but for developed countries basically ties contributions to GDP.

GDP isn't just a number on a paper though is it? It's economic output. A big reason why the dollar is so popular is because of America's dominant GDP.

It's not the only factor of course.

Real GDP is the universally accepted measure of economic output - not nominal.

 

[gadgetcool5]

Currently the US is experiencing high inflation.

Relative nominal GDP performance is a simple sum of the inflation rate + real GDP rate + the exchange rate.

If China wants to surpass the US in nominal GDP, it must either have higher real GDP growth (the best), a high inflation rate, and/or an appreciating exchange rate. If, for example, the US inflation rate remains at 5% whereas China's is only 1%, then even if China's real GDP growth is 4% higher than the US, it will never surpass the US in nominal GDP unless the yuan exchange rate also goes up. The exchange rate and inflation rate are determined by a lot of things including government policy, that has nothing to do with real production or economic activity.

This is why I prefer GDP (PPP) over nominal rates, however since the Western press prefers to use the nominal GDP figure, most people cite the latter even though it is an irrational measurement. According to the first measure, China became the world's largest economy back in 2013 once you count Taiwan and Hong Kong, and in 2014 counting only the People's Republic of China.

 

[2handedswordsman]

Currently the US is experiencing high inflation.

Relative nominal GDP performance is a simple sum of the inflation rate + real GDP rate + the exchange rate.

If China wants to surpass the US in nominal GDP, it must either have higher real GDP growth (the best), a high inflation rate, and/or an appreciating exchange rate. If, for example, the US inflation rate remains at 5% whereas China's is only 1%, then even if China's real GDP growth is 4% higher than the US, it will never surpass the US in nominal GDP unless the yuan exchange rate also goes up. The exchange rate and inflation rate are determined by a lot of things including government policy, that has nothing to do with real production or economic activity.

This is why I prefer GDP (PPP) over nominal rates, however since the Western press prefers to use the nominal GDP figure, most people cite the latter even though it is an irrational measurement. According to the first measure, China became the world's largest economy back in 2013 once you count Taiwan and Hong Kong, and in 2014 counting only the People's Republic of China.

If the productivity levels of PRC have reached a moderate parity with those of USA, I think that exchange rate will turn to the direct opposite as a meaning, because now the inflation exported by USA and EU and their massive printing( it was already happening by the huge trade defficits whitch they also tend to grow) is feeding projects all around China and well, all around the world. Invested in combating Covid 19, and being the profound factory of the world as usual. In combating climate change, setting massive goals and repeatedly achieve them. Yankees must surrender to the flow and let younger generations to live in peace and harmony. No need to compete and compare, is counter-productive!

 

[j17wang]

Currently the US is experiencing high inflation.

Relative nominal GDP performance is a simple sum of the inflation rate + real GDP rate + the exchange rate.

If China wants to surpass the US in nominal GDP, it must either have higher real GDP growth (the best), a high inflation rate, and/or an appreciating exchange rate. If, for example, the US inflation rate remains at 5% whereas China's is only 1%, then even if China's real GDP growth is 4% higher than the US, it will never surpass the US in nominal GDP unless the yuan exchange rate also goes up. The exchange rate and inflation rate are determined by a lot of things including government policy, that has nothing to do with real production or economic activity.

This is why I prefer GDP (PPP) over nominal rates, however since the Western press prefers to use the nominal GDP figure, most people cite the latter even though it is an irrational measurement. According to the first measure, China became the world's largest economy back in 2013 once you count Taiwan and Hong Kong, and in 2014 counting only the People's Republic of China.

Keep in mind that exchange rates reflect long term expectations of inflation, so if the US experiences continued high inflation, its exchange rate will also fall.

 

[sinophilia]

Keep in mind that exchange rates reflect long term expectations of inflation, so if the US experiences continued high inflation, its exchange rate will also fall.

If the exchange rate never reflected it then Zimbabwe would be the worlds hyperpower, exercising a firm but fair fist over the entire planet with 300 nuclear powered helicarriers.

 

[Awwkus]

Can we please do a 2022 refresh of this chart? Obviously we already have 2021 actual figures and we may also account for inflation as that features prominently in the US economy right now.

 

[HeiTangSeng]

Can we please do a 2022 refresh of this chart? Obviously we already have 2021 actual figures and we may also account for inflation as that features prominently in the US economy right now.

There’s no need to do this anymore. In OP’s most optimistic projection of China’s 2021 nominal GDP, he was still way too conservative by a trillion dollars.

2025 is a given. Let’s move on.

 

[Maikeru]

Ray Dallio's Power Index 2022 is out. US still no.1 but declining, China still no.2 but advancing. 10 year average growth rates forecast at 1.3% for USA vs 4.3% for China.

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