The Age of America ends in 2016: IMF predicts the year China's economy will surpass US

The Age of America ends in 2016: IMF predicts the year China's economy will surpass US

 

The International Monetary Fund has set 2016 as the year China's economy will surpass the U.S. - effectively ending the 'Age of America'.

It means that whoever wins the 2012 presidential election will have the dubious honour of presiding over the fall of the Uniterd States.

It is the first time the IMF has put a time frame on the inevitable march of the communist country, and forecast has profound implications for the balance of global power.

Endless potential: A female worker in a sprawling weaving factory in Jinjiang. China's roaring economy will overtake the U.S. in 2016, according to the IMF

 

Slow decay: By comparison, the once-bustling but now derelict Packard Motor Plant in Detroit is a stark example of the decline in U.S. economic power

The IMF seemed almost embarrassed to announce the news, inserting its prediction without fanfare on its website in recent days.

The ramifications for the U.S. - and indeed any country that has allied itself politically and monetarily to the superpower - are unsettling.

No country in the modern era has come close to matching the might of America's economy.

Friends for the moment: Chinese President Hu Jintao and U.S. President Barack Obama together at a State dinner at the White House in Washington in January

Converging superpowers: The decline of the U.S. economy has been matched by the rise of the Chinese market. Their projected trajectories meet and cross over in 2016

THE SECRET TO CHINA'S SUCCESS... AMERICA

China as strictly enforced price controls and kept the value of its currency, the yuan renminbi (RMB), artificially low.

This has paved the way for the manufacture and export of goods at irresistibly low prices. The 'Made In China' label has become synonymous with remarkably affordable products - even if the quality and ethics remain questionable.

Ironically, one of the biggest consumers of these products is the U.S. - simultaneously bulking up China's economy while starving its own, and delivering the purchasing power of the world’s largest economy to its main rival.

The big questions arise in the shifting balance of power from the U.S. to China.

The first question is whether the emerging China will be well behaved or aggressive, operating without constraints.

Another question is how the U.S. will respond to China's dominance in both economy and military might.

The U.S. has faced and seen off more hostile enemies in the past - such as Imperial Japan and Nazi Germany, as well as the Soviet Union.

But it has never had to square up to a rival that outweighed it in economic strength.

At its very zenith, the USSR produced only a third of the goods and services of the U.S. Similarly, Japan at it's peak managed less than half of America's output.

China, on the other hand, has been accelerating towards the U.S. with remarkable speed. Just 10 years ago, the U.S. economy was three times that of China’s.

It's a staggering statistic, even when taking into account the fact that the U.S. economy has been dropping down to meet China's meteoric rise.

The 2016 date has taken many analysts by surprise, many of who were optimistic that America could hold out until the later part of the 2020s.

But Brett Arends writes in the Wall Street Journal that many have been looking at the wrong criteria when judging the prospects of both countries.

He said analysts were comparing China's gross domestic product (GDP) against that of the U.S. - 'a largely meaningless comparison in real terms'.

Instead, IMF analysts compared the difference in 'purchasing power parities' - what people earn and spend in their respective domestic markets.

Using this criteria, they found that the Chinese economy would grow from $11.2 trillion in 2011 to $19 trillion in 2016. Over the same period, the U.S. economy will rise from a dominant $15.2 trillion to a trailing $18.8 trillion.