China 'No. 1 economy by 2016': reports
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International organizations appear to be competing as to which one can conjure up the most impressive scenario of China's rising economic clout, but the boldest version to date allegedly belongs to the International Monetary Fund (IMF), which predicts Beijing will take a mere five years to become the world's largest economy.
As bets continue on how soon China will take the crown, some economists poured cold water on such projections, calling them flattery that mask the true gap between the Chinese and US economies.
China's economic output will overtake that of the US in 2016 and amount to $19 trillion in purchasing power parity (PPP) terms, a recent IMF report said, according to the Singapore-based Lianhe Zaobao newspaper.
The projection, reportedly mentioned quietly on the IMF's website in recent days, could not be found by the Global Times online.
The IMF representative office in China did not confirm the report, while the institution's headquarters in the US could not be reached for comment on Monday.
Having produced just 2.2 percent of the world's economic output in 1980 at the outset of its reform and opening-up period, China's share of the world economy had risen to 7 percent by 2000.
It now stands at 14 percent and is expected to top the list by 2016 with 18 percent of the total amount, with the US down on 17.7 percent, according to the IMF predictions.
This transformation will see China become able to produce more in a fortnight by 2016 than it did in a year when the reforms began.
Derek Scissors, a research fellow in Asian economic policy at The Heritage Foundation, a think-tank based in Washington, said PPP is one of the reasons behind recent claims that China's economy may surpass the US since China's PPP-adjusted GDP figure was nearly $10 trillion in 2010, much higher than the official $5.88 trillion released by China's National Statistics Bureau.
He admitted that using PPP is a step in the right direction in comparing the two economies but that multiple pitfalls remained.
"For economies as large and diverse as those of the US and China, differences in purchasing power within each country are huge. It is almost meaningless to find an average price for all of the US or all of China," Scissors wrote on his Reuters blog.
"Perhaps even more important in comparing two economies, PPP changes over time. Because prices change at different rates in different places, purchasing power comparisons made at one point can be quite misleading just a few years later, and even more misleading when projected forward in time," he said.
The discussion of when, if not whether, China will overtake the US is unstoppable since Japan was officially bumped off as the second-largest economy, but Chinese officials and analysts have tended toward sobriety in reminding people that China is still an emerging nation that faces plenty of development problems.
According to previous projections by the World Bank, Goldman Sachs and other institutions, China is on course to overtake the US to be the No. 1 sometime around 2025.
Zhou Shijian, a senior researcher with the Center for US-China Relations at Tsinghua University, told the Global Times that this is an attempt by the West to flatter China.
The US has three major advantages in terms of economic development, Zhou noted.
"Look at the sheer size of its economy – nearly three times that of China. The US invests hugely in research and development and therefore remains strong in innovation, which China badly lacks. Moreover, through the dollar, the US is able to transfer risks to other countries by printing more bank notes," Zhou said.
"China is at the low-end of the global economic chain, so the first thing to do to catch up with the US is to invest more into technological research, as well as adjust and upgrade the economic structure," he noted.
Jia Kang, director of the Institute of Fiscal Science under the Ministry of Finance, added that China's future economic development will be restrained by limited natural resources and the environmental cost of its rapid development.
"China is undergoing radical changes to its mode of development, which means it has both robust growing power and fierce conflicts," Jia told the Global Times on Monday.
To maintain high-speed growth in the next decade, Jia said China has to tackle its rising social problems, such as the uneven wealth distribution.
China's GDP growth eased in the first quarter of the year to 9.7 percent year-on-year, down from 9.8 percent in the final three months of 2010, while its CPI figure reached a new high of 5.4 percent in March.
