The Chinese economy is on its way to overtake America to become the world’s biggest economy by 2016, at least the Organization for Economic Co-operation and Development thinks so.
Despite a slowing Chinese economy, the OECD said in its latest report that China’s economy is expected to grow at 8.5 percent in 2013 and 8.9 percent in 2014.
Baupost’s Seth Klarman: the Fed has broken the stock market [Q4 Letter]
Baupost founder Seth Klarman told investors that the large amounts of stimulus that have been poured into the world's economies are masking the severity of the problems caused by COVID-19. Q4 2020 hedge fund letters, conferences and more In a letter seen by the
China’s annual GDP is less than 50 percent of America’s, and it is yet to be seen how the dragon will double its economy within three years. Though OECD did mention that China’s aggressive expansion has slowed in the past few years, it thinks that China’s average growth rate for this decade will remain above 8 percent even at the current rate of reforms.
China’s rail and road capacity is nowhere near the other major economies with a similar level of development. And sub-standard housing requires more expenditure on infrastructure. To maintain the growth momentum, OECD asked the world’s second largest economy to open the market for competition where state-run companies still enjoy monopolies.
The new Chinese leadership has pledged more reforms. China has been promising to open certain industries for private competition since 2005, but nothing has happened so far. The World Bank has also warned that the country’s economic growth will witness a steep decline if it doesn’t reduce the dominance of state-owned companies.
On the other hand, The Economist also predicted that China will become the world’s largest economy by 2018. The Economist said that Chinese economy grew at an average rate of 10.5 percent in the past decade, surpassing America’s growth grate of 1.6 percent. But famous economist and finance professor at Peking University strongly disagrees with the prediction of The Economist, saying that China’s GDP will not match that of the United States, not before 2018.
Mr. Pettis said that consensus growth rate for China has moved down to 5-6 percent in the past few years, compared to 8-9 percent a couple of years ago. He said China will barely break a 3 percent economic growth rate in this decade. But it will take another 2-3 years before the figures fall this low.