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Saturday 5 November 2011

China's Economy

With all the talk of the Euro powers (Germany and France), asking for the Chinese to bail out the Euro, we need to look more closely at the Chinese economy and to put things in perspective.
 
China - Super Economy or Trade Dependent?
Super Economy or Trade Dependent?
 
For all China's dramatic economic rise, its economy still accounts for less than 10% of global GDP at present, while the developed nations of Europe and America make up nearly 50%.
 
It is Europe - even in a time of crisis - that does much to power China's rise, rather than the other way round. Europe, is China's biggest export market. Last year it bought 280bn Euros of Chinese goods, while China isn't investing much in Europe, in fact less than 1bn Euros last year. That was little more than 1% of foreign investment in Europe, which pumped five times as much into China (and could move it elsewhere if the economics worked that way e.g. Vietnam).

Before China started to really decline in the late 17th Century, it accounted for approx 25% of the worlds GDP (in line with its approx 25% of the world population). This was why it felt no need to open up or take new ideas from the West .... now it accounts for about 17% of the worlds population, and about 10% of GDP. We can expect that its share of world GDP will probably flat-line at about 20% in the next decade or so and with India set to reach levels of about 15% of world GDP, they will be a powerful block.

However when GDP is divided by population, the position is a lot weaker. GDP (PPP) per capita places both nations very low down the league tables. They have to feed and clothe billions of people, or risk rebellions, and this where the money ultimately will have to go.

The US position of the mid 1960's, made them dominant in both GDP and GDP (PPP) per capita, a position which the Chinese will never attain, nor will they or India be likely to catch European life standards for several decades (if ever).

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