China is now on the fast track towards becoming the largest economy in the world by sheer GDP alone.</strong> The Economist has placed the date at somewhere around 2019, depending on the trend of some economic variables. (check it out here.) However, the question is, what exactly will this transition do?
China has a population of 1.33 billion people, while the US only has 310 million people.We should take note that while China’s GDP is bigger overall, its standard of living is nowhere near the developed countries’. It clearly has a lot of catching up to do, and I’m glad that the Chinese people are finally reaping the fruits of their labor.
Economic Superiority ≠ World Dominance
They say that it marks the start of Chinese oppression against the rest of the world. Somehow, we will all be forced to eat dogs or something. This worry is, in my opinion, horribly misplaced. Chinese progress does not erode the progress of other nations. Okay, there are some ways, but we’ll get to that later. The world economy is not a zero-sum game; it does not mean that a country’s wealth is another’s poverty. We should applaud the great growth in China, because now there are more goods and services for everyone that could be allocated efficiently through trade.
There is, however, one negative aspect about the rise of China. The rapid growth (combined with other tigers such as Brazil and India) induces upward pressures on global prices, such as those for food and oil. However, trying to restrict the standard of living of the Chinese for this reason is simply against the utilitarian benefit. Moreover, I have faith in enterprise’s ability to innovate to produce food and energy more efficiently in response to the price signal.
Anyway, the bottom line is that China’s rise is good and we should welcome it with joy and openness; not resentment and protectionism.
Side Note: During Hu Jin Dao’s visit to Washington, he hinted at China’s intent on making the renminbi the international currency. According to this article on The Economist, there are certain factors that don’t make this possible right now. The article also explains that China’s reasons for wanting international currency status may not necessarily be to acquire the benefits the US currently receives.