Will U.S. Be Overtaken by China - Research Paper Example

?Will U.S. Be Overtaken by China? Many financial observers have d that China’s economy is likely to overtake that of the United s in less than ten years. The IMF projections state that by 2016, China should be the world’s largest economy1. This will be the first time in over one century that the US will not sit on top of the world’s economies. The assumption and expectation that China would one day become the world’s richest country is not a new one. The country has enjoyed massive economic growth and expansion of its global presence which have made it to economically surpass tens of countries within the last 20 years to sit at the second place. The current and future economic growth of China is as fast as it is diverse, while the US is facing a lot of financial challenges2. The fact that China’s economic and socio-political performance is only expected to be better while that of the US remains shaky makes China more likely than not to overtake the US in the next few years. Important Indicators for China’s Growing Superiority For the last thirty years, China has reported impressive economic growth3. The country has in fact been the fastest growing economy in that period of time. Economists have put the economic growth of China to be 17 times what it was in 1980. An interesting fact is that China was rapidly growing while most of the rest of the world was not doing that well financially. About ten years ago, the United States’ economy was 10 times bigger than that of China. Today, China’s economic superiority cannot be refuted and its place as a world economic power was sealed after overtaking world’s number two spot from Japan. After a long time of what seemed to have been economic slumber, China finally woke up to its potential in the eighties. Other countries including the United States started to adopt and implement neo-modern policy changes. This included opening up to unrestricted capital flows and external trade. The countries also developed policies that enabled their central banks to be increasingly independent. They also adopted tighter cyclical monetary and fiscal policies and abandoned many of the development strategies that had previously been highly successful. China on the other hand, did not adopt these policies, many of which were promoted by world financial bodies such as the IMF, World Trade Organization and the World Bank whose decisions were heavily influenced by decision makers and economic planners based in Washington. China was not a member of the WTO up until 2002. Although China’s economic acceleration involved the expansion of foreign investment and trade, its financial decisions and management were carried differently from the rest of the world4. The most outstanding difference was that China’s economy was largely controlled by the state, unlike in the US where it was liberalized. State control was meant to ensure that trade and investment decisions were in line with the development goals of the government. One of these goals was to develop and make products intended for the external or international market. China’s policies also promoted the use of enhanced technology. The aim was to transfer high level technological competence from foreign investors to the local economy. The government was also keen on hiring Chinese for jobs at the managerial and technical levels. This meant that foreign enterprises could not compete at the same level with many domestic businesses. The economy of China is still largely controlled by the government. The state controls a huge percentage of the exchange rate and other financial systems. A substantial amount of industrial assets are also under the control of the government. When other countries were struggling under the pressure of the recent worldwide recession, China’s economy was not affected. The state-led economic system can be and should be credited for this. The country enjoyed an enviable 9.8% GDP growth though this was a fall of 3.7% mainly due to the poor performance of the international market where China has a wide presence. Financial factors are not the only ones that have enabled China to rise quickly on the global economic map. The political systems in the two countries have also helped shape their economic turns. The United States’ foreign policies led it to carry out expensive invasions in the Gulf. The occupation of Afghanistan and attacks on Pakistan and Libya not only led to the loss of millions of lives, it also caused a huge dent in the economy of the US. The US also controls the economic policies of several developing countries through world financial institutions like the IMF. This has also caused considerable damage to the country’s economy over the past few decades. China on the other hand has played a largely passive role in world affairs. The country’s foreign policy is focused mainly on securing trade and acquisition of raw materials that have the potential to fuel domestic growth and development. By staying away from how other countries run their financial policies, China has been able to focus all its energies and resources on national development, unlike the United States which spends billions of dollars trying to deal with other countries’ issues and problems. Comparisons can be made between China’s and the US’s economy using both countries’ purchasing power parity5. According to IMF projections, the economy of China will grow from the current $11.2 trillion to about $19 in four years’ time. This means that the United States would reduce its share of the global economy to 17.7% while China’s share would rise to 18%. Science and technological advancements in the two countries can also be used to identify if it is possible for China to overtake the U.S as the world’s superpower6. 15 years ago, the level of scientific research in the United States was more than ten times more that of China. By 2008, China’s research level had increased 7 times while that of the US had only increased by less than 60,000 during the same time frame7. Conclusion Compared to the United States of America and other developing countries such as England and Japan, China’s growth in financial terms over the past couple of years remains unmatched. The recent financial crisis that gripped most of the world did little effect on China compared to the United States and other countries that have relied on policies that are based on western ideologies. Beyond its economic astronomic growth, China has also achieved a lot of growth technologically, managing to have missions even in space like other developed countries. Its military force and capabilities are comparable to many developed countries. At its rate of growth, the country needs only a few years to catch up with the US in terms of military capability. China’s control of the rest of the world has been direct, passive and yet strong. It has managed to cut for itself a favorable niche in the international scene as a great producer of affordable products. This strategy has made the country be considered a friend of many nations as opposed the US which has been seen to prefer the big brother strategy. In fact, to a great extent, the US and its control tools such as the IMF and World Bank has been unable to control China. From the facts and predictions stated above, there is a high chance that the US will become second to China in the next few years, possibly as soon a 2030 according to some quarters8. Bibliography 1. Weisbrot, Mark. “2016: When China Overtakes the US.” The Guardian (London), April 27, 2011. 2. World Bank. World Development Indicators. 2010. http://databank.worldbank.org/ddp/home.do?Step=2&id=4&hActiveDimensionId=WDI_Series 3. Dong, Xiao-yuan, China's Agricultural Development: Challenges and Prospects, Ashgate Publishing, 2006. 4. Starr, John, Understanding China: A Guide to China's Economy, History, and Political Culture. Hill and Wang, 2001. 5. Chan, Steve. “Is There a Power Transition between the U.S. and China? The Different Faces of National Power” Asian Survey, Vol. 45, No. 5 (September/October 2005), pp. 687-701. 6. Shukman, David. “China to Overtake the US on Science in Two Years”. BBC News (London), Mar., 28, 2011. 7. AFP, Hong Kong, "World Bank says China could overtake US by 2030", Taipei Times, Mar 24, 2011, http://www.taipeitimes.com/News/biz/archives/2011/03/24/2003498946 Read More