Perspective: China Rising
How the US can compete with this economic juggernaut.
The United States began its long trek to becoming a worldwide economic powerhouse during the nineteenth century, and became the dominant economic force in the twentieth century. In 1970, US GDP was $1 trillion; it's risen to $14 trillion today.
In 1970, China's GDP was $92 billion. Today, it's $4.2 trillion - a 4,450% increase in 28 years. They now have the third largest economy in the world, and will surpass Japan as the second largest economy on the planet within the next 5 years. Sometime between 2030 and 2050, China will overtake the United States as the largest economy in the world.
This tremendous growth is being driven by the migration of millions of people from farms to the cities. By 2007, 594 million Chinese lived in urban areas, and the United Nations has forecast that China will have an equal rural and urban population distribution by 2015. In the long term, nearly 70% of the population will live in urban areas by 2035. According to Professor Lu Dadao, president of the Geographical Society of China (GSC), China's urbanization took 22 years to increase to 39.1% from 17.9%. It took Britain 120 years, the US 80 years, and Japan more than 30 years to accomplish this.
This rapid urbanization will create huge infrastructure growth, since more roads, sewers, houses, manufacturing plants, power plants, public transportation, and office buildings will need to be built. This trend is identical to the trend seen in the US in the 1800s, with urbanization causing crises in pollution, congestion, and public health. The efforts to solve these problems will create even more growth. The manufacturing of goods for export will slowly be replaced by production for China's own internal demand. Eventually, China won't be as dependent on the US for its economic existence.
The population of China is currently 1.3 billion, more than 4 times the size of the US. China's population isn't expected to grow much, if at all, between now and 2050. This is a dramatic difference from the US in the 1800s, as immigration and high birthrates increased population exponentially. The Chinese birthrate, which now stands at 1.7 children per family, isn't high enough to even maintain its current population over the long term.
Most of the arguments that I hear regarding why China won't surpass the US relate to its aging population. After examining the current age distribution and the projected distribution between now and 2050, there's very little difference between the US and China on a percentage basis. It's clear that young populations lead to more vitality, growth, and invention. As the chart below details, 20.1% of the Chinese population is under the age of 15. In the US, 21.4% of the population is under the age of 15.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter