10/02/09 Baltimore, Maryland
Sixty years ago yesterday, China began its communist experiment and slow rise as a world power. This anniversary was not left unnoted by the Red Nation, which staged a massive celebration yesterday that a Washington Post correspondent described as a “musical variety show… Mao meets Elton John.”
There was a parade in Tiananmen Square, where the proud country dragged out 108 city-crushing missiles and nearly 190,000 soldiers, dancers, celebrities and performers — including, quite naturally, a unit of… retro vixen militants?
Yeah… we don’t get it.
Curiously, there were no musical interpretations of the horrors that begat the People’s Republic (or the Great Leap Forward and Cultural Revolution that soon followed)… maybe they’re saving those for the centennial.
And this new era of communism comes with a shiny new economic forecast: China could be the world’s second biggest economy as soon as 2010 and the world’s largest in as little as 20 years. This altered trajectory is courtesy of the IMF, which revised its World Economic Outlook yesterday. In short, emerging nations with strong export economies (like China) will drive global growth in the next two years, while more established economies like the U.S., eurozone and Japan will lag behind.
Specifically, the IMF expects China to continue growing around 8-9% a year as Japan — the world’s second largest economy — will be lucky to grow much faster than 1.7%. Plug that in some fancy charting software and you get this:
With Japan a foregone conclusion, China now sets its sights on I.O.U.S.A. The IMF has no projections that far away, but researchers at the Nomura Institute of Capital Markets Research proclaimed this week that China will pass the U.S. sometime between 2026-2039, depending on yuan appreciation.
We’re skeptics, if only because it’s such a widely held belief nowadays that China will inevitably rise to the top. Before they get there, they’ll have to rewrite their entire economic credo, the current staple of which is American overconsumption. And it was only 20 years ago when every broker was convinced Japan would soon be the world’s economic powerhouse. Eight of the world’s 10 biggest companies were Japanese in 1988. Today, the biggest (Toyota) is 22nd, and only five others are in the top 100.
But there is one thing that might “make it different this time”: people. 1.3 billion Chinese people, to be specific. If China can ever monetize its massive population, they’ll leave us all in the dust:
Ian Mathias
Ian Mathias is the managing editor of Agora Financial’s Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report – Agora Financial’s flagship income investing advisory.
Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He’s also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he’s not at work, you’ll probably find Ian on a bicycle, racing up and down the “mountains” of Baltimore County. Ian has a BA from Loyola University in Maryland.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
