China's Emergence As A Global Superpower

[Billy T]

In 2005, China became a net exporter of cars (by number of cars I think, but if anyone knows for sure, please post.)

I suspect that they were still a net importer of cars by value. I.e. I think the average price of the imported car was significantly greater than the price of the exported car.

China's cars are targeted for the middle class, but China has many very wealthy citizens riding in $50,000 cars. In that "socialistic country," some are much "more equal than others."

In about a decade the top 2.5% of the Chinese population alone will have more purchasing power than ALL Americans. That is why Detroit is closing autoplants in US and frantically building new ones in China along with all the world's car makers. - I.e. building plants, not for the lower labor cost (although that certainly helps the bottom line), but for the chinese market, which is by far the world's fastest growing.

That huge market with citizen's real salaries (purchasing power) increasing in double-digit percents every year is why China was the first country in the history of the world to receive more than 100 billion dollars of FDI (Foreign Direct Investment) in 2005.

Brazil is not a significant source of FDI, but did build an airplane factory in Harbin China and now has their first firm order for deliverys in 2006. (Brazil may soon be the world's third largest maker of passenger aircraft.) Yahoo, MS, Ebay, Starbucks, etc all will agree to play by China's rules, as they know this hugh market with rapidly increasing average incomes (in contrast to the US average real income which has been decreasing for four years) is the profit center of the NEAR future.

I think the thread's question is too vague and has a "Yes" answer with 100% confidence. Question should be changed to:

Do you think Chinese Economy will be world's largest at end of 2010?

Chinese economy surged past France and Italy in 2005. Very likely will pass England in 2006. Hard to tell about Germany holding on to second place. If the German recovery is real and "has legs" China may not claim the number two spot until about 08 or 09.

I think the Dollar will collapse before end of 2010, and with it the US economy. Even if China does not dump its dollar hoard for gold and /or ownership of proven oil fields before 2010, a weaker dollar will not be able to buy even enough oil to run a 1990 size US economy because the US economy has been built on the private car, has wealth dispersed to the suburbs and with few exceptions, abandoned the cities to the poor. WallMart stores will close their doors, etc. as the customers can not aford gas to come and US never developed public transport as Europe and Asia have. US economy is at least 85% consumption driven and the debt of coustomers is already at historic high. Just static home values will collapse the US economy if foreigners become scared of holding dollars and credit terminates or is very costly. All with adjustible rate mortgages will lose their homes. etc. Baby boomers start collecting instead of paying taxes, etc. You do not even need to have gone to college to see what is coming.

Thus I think that if the German economy is expanding and US is sinking they will be about equal in 2010. I.e. China may still be number three in 2009 but pass both US and Germany to be numer one at end of 2010. Thus, I answer the newly phrased question : Yes.

 

[G. F. Schleebenhorst]

What natural resources does China have? In my view, that's the key for a nation to progress and thrive. As far as I'm aware, China has few natural resources other than a huge quantity of manpower, which can't do much without natural resources.

And if that's true, then the only way China can progress much at all, is to buy or take by force the needed resources from some other nation. If she buys those resources, then she's at the mercy of the seller. If she begins such a conquest, she'll have to answer to all of the other nations on Earth!

So, no, I don't think China will ever become the next super-power.

Baron Max

I think the Japanese during WWII would disagree with you. Why do you think they invaded China? China has *massive* amounts of natural resources.

 

[Hurricane Angel]

They were strapped for land, not resources. China has a decent amount, but the desert is just a desert.

 

[Billy T]

...China has a decent amount {of land}, but the desert is just a desert.

Like the desert of Saudi Arabia?

 

[MetaKron]

Well, while Billy's helping us think inside the box...

 

[Rene Wooller]

while I know it to be essentially certain to occur sooner or later, gives me the feeling of a ice-cold serpent grawing through my entrails. Its not something I want to give in to and definitely not while there is any chance at all of survival.

Life is continual change, so I think the way you concieve "survival" needs to me more pragmatically redefined.

Shit happens, and we are only faced with options:
- understand the reality that is the source of your pain as it occurs and strive to make things better. (I believe you say "thems the breaks"?)

- refuse to acknowldege change, struggle to keep things the same, and in struggling, make things worse. (eg, try to nuke everyone to stay #1 on what is left of the planet)

USA may be #1 now, but directions, not positions are much more important... ..and over the last 30 year the US hasn't really gone anywhere :
http://www.rprogress.org/projects/gpi/

 

[Billy T]

...USA may be #1 now, but directions, not positions are much more important... ..and over the last 30 year the US hasn't really gone anywhere.
http://www.rprogress.org/projects/gpi/

I agree with your point but think the reference is also flawed. (It is too much biased to social value judgements. For example: "the GPI assesses the well-being of households, rather than focusing exclusively on the number of dollars they spend.") Their full statement* of difference between GDP and GPI is footnote to this post.

The GPI correction 3.1 is very worthwhile. For example, GDP of 2006 will include the billions spent to restore New Orleans. - That is nonsense. That component of GDP only gets back what was lost. I could boost GDP by paying one group of men to dig a hole and another to fill it back in again. GDP of US is much greater than that of China, mainly for reasons like this.

My view is that we need and index that reflects increase in a nation's competive strength. For example, both GDP & GPI would include money spent on Rock Concerts, NFL football games (and travel / hotels etc associated), Hollywood movies (Plus Oscars, pulp magazines, etc.), Disneyland vacations, etc. I.e. Much of what is in both is of zero value in very short time, if not the next day. What is needed is an index that reflects the improvement of ports, factories, roads, railroads, education, housing, pubic transport, etc. - things that will be contributing to the competive strength of the nation. I will call this index, the Gross Competive Index, GCI.

In terms of the GCI, China and US are about equal today. Most of that planned economy is going for roads, factories, power plants, ports, etc and very little is entertainment related.

___________________________________________________
*THE GENUINE PROGRESS INDICATOR: SUMMARY OF METHOD
The Genuine Progress Indicator (GPI) takes from the GDP the financial
transactions that are relevant to well-being. It then adjusts them for
aspects of the economy that the GDP ignores. The GPI thus reveals the
relationship between factors conventionally defined as purely economic
and those traditionally defined as purely social and environmental.
Like the GDP, the GPI begins with the nation’s personal consumption
expenditures. But the GPI assesses the well-being of households, rather
than focusing exclusively on the number of dollars they spend. While the
GDP then adds the nation’s spending on investment and government, the
GPI considers those expenditures defensive, and thus begins with personal
consumption expenditures as its base.
Personal consumption expenditures are then adjusted for income distribution
using the Gini coefficient. It is often assumed that the rising GDP lifts
all boats, but this is not necessarily true. From 1973 to 1993, for example,
while the GDP rose by 55%, real wages declined by 3.4%. In the 1980s
alone, the poorest fifth of American families lost 0.5% of their income each
year, while the top 5% of households increased their real income by 3.9%
per year. Growth did not benefit everyone, and a true measure of well-being
should take this inequality into account.
Using personal consumption expenditures adjusted for income inequality
as its base, the GPI then adds or subtracts categories of spending based
on whether they enhance or detract from our nation’s well-being.
The following nonmonetary benefits—ignored by the GDP—are included in
the GPI:
1. the value of time spent on household work, parenting, and volunteer
work;
2. the value of services of consumer durables (such as cars and refrigerators);
and
3. services of highways and streets.
The GPI then subtracts three categories of expenses that do not improve
well-being:
1. defensive expenditures, defined as money spent to maintain the
household’s level of comfort, security, or satisfaction, in the face of
declines in quality of life due to such factors as crime, auto accidents, or
pollution. Examples include personal water filters, locks or security
systems, hospital bills from auto accidents, or the cost of repainting
houses damaged by air pollution.
2. social costs, such as the cost of divorce, crime, or loss of leisure time.
3. the depreciation of environmental assets and natural resources, including
loss of farmland, wetlands, and old-growth forests; reduction of stocks
of natural resources, such as fossil fuels; and damaging effects of wastes
and pollution.

 

[quadraphonics]

What is needed is an index that reflects the improvement of ports, factories, roads, railroads, education, housing, pubic transport, etc. - things that will be contributing to the competive strength of the nation. I will call this index, the Gross Competive Index, GCI.

In terms of the GCI, China and US are about equal today. Most of that planned economy is going for roads, factories, power plants, ports, etc and very little is entertainment related..

Well, the way I read your footnote, your "GCI" seems to be more a measure of investment in quality of life than of competitive strength. Did you come up with this yourself, or are there some references you can supply us with? It sounds like a lot of hot air to me...

Anyway, the fact that one nation is investing more heavily in fixed assets typically implies that said country doesn't have as many fixed assets as others. I.e., it is a developing country. This is certainly the situation with respect to China and the US. The US, and other developed economies such as Europe and Japan, already have huge amounts of infrastructure that they've built over the years. China, India and other developing countries don't have a comparable level of infrastructure, and so must invest a larger portion of their annual income into it if they ever hope to catch up. But your GCI statistic says that China is making the *same* investments as the USA; since the US already has a lead, that would imply that China will NEVER catch the US! If you're going to use contrived statistics and definitions, you should at least make some up that support your position...

Moreover, China has much worse problems with government corruption, and its impact on the efficiency of investment capital. The official Chinese statistics may say that 50% of the Chinese GDP is investment, but how much of that gets siphoned off by corrupt officials at various levels? Take a look here:

http://simonworld.mu.nu/archives/128181.php

 

[Billy T]

Well, the way I read your footnote, your "GCI" seems to be more a measure of investment in quality of life than of competitive strength.Did you come up with this yourself, or are there some references you can supply us with? It sounds like a lot of hot air to me...

The foot note is my quote from Rene Wooller's reference (post below mine):
http://www.rprogress.org/projects/gpi/

I agree with you completely - GPI is a lot of "do gooder's" hot air. It is for the GPI, not the GCI I am suggesting (without giving a clear way to construct the GCI).

Anyway, the fact that one nation is investing more heavily in fixed assets typically implies that said country doesn't have as many fixed assets as others. I.e., it is a developing country. This is certainly the situation with respect to China and the US. The US, and other developed economies such as Europe and Japan, already have huge amounts of infrastructure that they've built over the years. China, India and other developing countries don't have a comparable level of infrastructure, and so must invest a larger portion of their annual income into it if they ever hope to catch up. But your GCI statistic says that China is making the *same* investments as the USA; since the US already has a lead, that would imply that China will NEVER catch the US! ...

I agree with most of this also, but there are a couple of flaws.
(1) The cost of construction, salaries, etc. in China is much less so the same expenditure buys more. For example, the Chinese program to make 50 "Harvard or better" university centers will cost only about 1/3 what it would in the US.
(2)The nation that is currently building new facilities, not only gets the benefit of more knowledge/ recent developments, etc. but also ends up with a better, more efficient, plant etc. For example, the US steel production facilites are basically WWII vintage.* Three years ago, they were losing money and could not compete with the ones built only a decade ago, so the US steel industry got special relief from Congress. Now they can make a small profit because the great increase in the demand for steel globally (mainly from China) has made it profitable to operate even old, non competive, plants. etc. with higher prices and production running at near world's total capacity.
___________________________________________
*There is a thread somewhere about the benefits of WWII. In the case of Europe and Japan, one is that they have much more modern steel plants than the US, which did not lose its steel plants during the war.

 

[quadraphonics]

(1) The cost of construction, salaries, etc. in China is much less so the same expenditure buys more.

This is already factored into the numbers when they are adjusted for purchasing power parity. In absolute dollar terms, the US invests more than twice as much as China, every year.

For example, the Chinese program to make 50 "Harvard or better" university centers will cost only about 1/3 what it would in the US.

Well, first of all, universities aren't terribly expensive things to build. You put up a few buildings and pay some professors and that's about it. I doubt that any country could spend more than about 1% of its GDP on universities, even if it wanted to. Also, something that costs 1/3 as much as its American version would still consume *twice* as big a portion of the Chinese GDP, since the American GDP is about 6 times the Chinese.

Moreover, I don't believe any of this hype about 50 "Harvard or better" universities. As of today, the US has over 100 universities that are better than the best China has to offer (http://ed.sjtu.edu.cn/rank/2005/ARWU2005TOP500list.htm). A "50 Iowa State or better" plan would be more realistic. Remember: the Chinese government comes out with all kinds of pie-in-the-sky plans like this, but that doesn't mean they'll work out.

(2)The nation that is currently building new facilities, not only gets the benefit of more knowledge/ recent developments, etc. but also ends up with a better, more efficient, plant etc.

Yep, that's the advantage to being behind. The advantage to being in front is that you build more advanced facilities for making more valuable stuff. Would you rather have the factory that makes microprocessors and memory chips, or the factory that screws them together into finished computers?

 

[Billy T]

...In absolute dollar terms, the US invests more than twice as much as China, every year....

Can you give referrences for this? (I.e. support statement.) I doubt this, but am not disputing it; however, its truth will depend upon what is considered "investment." China is first nation in history to receive mre than 100 billion of direct foreign investment (102 billion to be exact). Very little of this went to build new entertainment centers, such as Disneylands, new NFL or baseball stadiums, etc. Most went for factories, power plants, ports, dams etc. - things that I consider "investments."

Do you consider the fact that GM and Ford are not building US car factories, as they are in China, but closing approximately 20 in US a "negative investments" ? (I do.)

I.e. tell a little how your "twice as much as China" is calculated. I think it false, but perhaps you are ignoring the "negative investments" the US is making?

If too dificult to support your claim, at least list a few areas in which you believe the US is investing more than China. I happen to know that the autobile industry China is very positive and US very negative. China is already the world's largest producer of cell phone, computers, digital cameras etc. and most are made from ICs made in China, or at least Asia, not as you suggest only assembled, but it is true that other Asian nations are now able to make some component of consumer electronics more cheaply than China, so China is importing a lot of the components also.

China is planning start construction on 30 nuclear power plants, of their own design, in 2006 & 7. In this area of investment, the US doesn't even know how to design the modern ones as it has been more than 30 years since they did. (One is being talked about for Baltimore, but it will be a French design.)

Again, at least tell me some areas in which US is investing twice what China is.

 

[quadraphonics]

Can you give referrences for this? (I.e. support statement.) I doubt this, but am not disputing it;

It's this simple: the US GDP is $12.7 Trillion dollars, and it's got an investment rate of 16.8%, which is $2.14 Trillion annually (http://www.cia.gov/cia/publications/factbook/geos/us.html#Econ). China's GDP is $1.833 Trillion, with an investment rate of 43.6%, or $799 Billion (http://www.cia.gov/cia/publications/factbook/geos/ch.html#Econ). These are the absolute dollar amounts being invested every year, without adjusting for purchasing power parity. When adjusted for purchasing power parity, China's GDP jumps to $8.158 Trillion, and the investment figure becomes $3.56 Trillion. So, in absolute dollar terms, annual US investments exceed the *entire* Chinese economy. I'm not sure why you find this so incredible, given the yuan's low exchange value...

however, its truth will depend upon what is considered "investment."

Well, obviously, any quantitative discussion depends directly on the definition of the quantities involved... suffice it to say that I use the same measure of investment as is used by economists; the investment numbers given above are official statistics released by the US and Chinese governments. Those are the numbers they seem to think relevant; again, the definitions are available on the wikipedia page: http://en.wikipedia.org/wiki/Gross_domestic_product#The_components_of_GDP

China is first nation in history to receive mre than 100 billion of direct foreign investment (102 billion to be exact). Very little of this went to build new entertainment centers, such as Disneylands, new NFL or baseball stadiums, etc. Most went for factories, power plants, ports, dams etc.

The thing about foreign direct investment is that China does not own those assets! They're simply located in China. That's how direct foreign investment works: http://en.wikipedia.org/wiki/Foreign_direct_investment

So, while lots of DFI pumps up the Chinese GDP, it doesn't alter the strategic position of China as much as you might think. It represents companies from America (and other spots) taking advantage of China's cheap labor and non-existant environmental regulations.

Do you consider the fact that GM and Ford are not building US car factories, as they are in China, but closing approximately 20 in US a "negative investments" ? (I do.)

Well, old assets fall apart all the time; that's why developed countries still have to invest. Any healthy, dynamic economy is going to constantly shed old industries in favor of new ones. I'd add that Japanese companies are opening almost as many car factories in the US as US companies are closing. US car *companies* have been taking quite a beating lately, but in a globalized era, that's a very different thing from US auto *production* falling apart.

If you want examples of places where US investment is way ahead of China, look in the modern, high-tech sectors. Things like pharmaceutical development, cutting-edge microelectronics (the chips for cell phones and fax machines can be made in cheap Asian plants, but the latest-greatest Intel chips are still made over here), telecommunications, supercomputers, aerospace, etc. The US economy also has the benefit of an enormous diversity, where China's has a huge reliance on manufacturing and exports. It's true that a lot of the older, dirtier industries, like steel and coal, have become bigger in China than in the US, and that these are sometimes considered as "strategic" industries with a huge impact on geopolitics. However, I don't think their strategic importance is what it once was during, say, World War I...

 

[Billy T]

Thanks. You certainly provided good references for your case; however, mine is still standing as I think the correct understanding of "investment" is not as given by your third reference, which states:

"...'Investment' in GDP is meant very specifically as non-financial product purchases. Buying financial products is classed as saving in macroeconomics, as opposed to investment (which, in the GDP formula is a form of spending). The distinction is (in theory) clear: if money is converted into goods or services, without a repayment liability it is investment. ..."

I made "or services" bold. Much of the US investment is little better than hiring one set of men to dig a hole and another to fill it back in. By that I mean, tomorrow This "INVESTMENT" has contributed nothing to US competive strength as it does not exist.

More realistic examples than a filled in hole are the billions spent on entertainment, such as rock concerts, vacations, ball games of all sorts, etc. - The next day the US is with nothing to show for these enormous expenditures. Same as filled-in hole, This "gone tomorrow investment" should not be counted as part of the US "investment," but is by your definition. This type of thing, included as "INVESTMENT," is why US is investing at twice China's rate. US is mainly an over-extended, debt-driven, consumer-based, economy - not one making many true investments, but quite a lot of "negative ones" as factories close and their jobs are "out sourced." (MHO).

Also I do not consider the "investment" now being made to repair Katrina damage (buying boards, bricks, copper pipes, etc.) true investment. Nor do I consider the purchase of bombs etc to drop in Iraq etc "true investments." (Militray supplies is not an a true investment for China either, but the US expenditures in this area equal the rest of the world's, China included!)

Likewise, although most would consider a new Disneyland theme park an "investment" (and it is still there tomorrow), I was suggesting that that does not make US much stronger is a struggle with China. - A new power plant, university research center, increasing (not decreasing) student loans, etc. would be much more of what I want to call "investment."

...The thing about foreign direct investment is that China does not own those assets! They're simply located in China. ...So, while lots of DFI pumps up the Chinese GDP, it doesn't alter the strategic position of China as much as you might think. ....
I'd add that Japanese companies are opening almost as many car factories in the US as US companies are closing. US car *companies* have been taking quite a beating lately, but in a globalized era, that's a very different thing from US auto *production* falling apart....

I only quoted this to show you seem to be applying double standards.

When I mention the 102 billion of DFI in China, you respond that "China does not own it"
When I note that GM and Ford are failing in US, you respond "but not Japanese car companies in the US."

I think the correct view is that if a new factory is made in country X and it can sell its products, then country X is stronger. Rule should be same for both US and China in your argument.

Only time will tell which of us is right. I expect that China, by making more of what I call "investments" than the US does, will pass the US in about a decade or two at most. You seem to be content to use the above definition (admittedly the more standard one) to prove that US is making twice the Chinese investment. (and you, in these terms, are correct) but I continue to think that the nature of what China is spending its "investment money" on is so much more of a true investment, and thus that China will pass the US.

But if China could be persuade to emulate the US and spend a hugh fraction of its "investment money" on entertainment, vacations, fashion clothes, French wine and other consumer imports, which are not existant next year, etc. instead of on 30 new nuclear power plants, worlds largest ports, largest dams, 500+ large new factories annually, education, etc, then I would agree with you.

But I think the time has come for us to just "agree to disagree."

 

[quadraphonics]

"...'Investment' in GDP is meant very specifically as non-financial product purchases. Buying financial products is classed as saving in macroeconomics, as opposed to investment (which, in the GDP formula is a form of spending). The distinction is (in theory) clear: if money is converted into goods or services, without a repayment liability it is investment. ..."

You've edited out the most important part of the definition, which was the first sentence:

"Investment is defined as business investments in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. "

Notice that it consists of *business* expenditures. Consumer spending is NOT included in this figure. The "services" discussed here are things like paying somebody to dig a mine, build a factory, or write a piece of software. None of the money that consumers spend on entertainment, or food, or even appliances and electronics, is included in the investment figure.

Beyond that, it's clear that the only investments you think have strategic value are exactly the kinds of things developing countries invest in heavily. This position will obviously result in the conclusion that developing countries are rapidly overtaking developed ones. I don't agree with that view at all, nor, I think, do many reputable economists. I'd urge you to look at some industrial production figures, as those are probably closer to what you have in mind. Moreover, your predictions about when the Chinese economy will overtake America's are lacking in that they consider only investments rates, and don't mention the total amount of fixed capital already possessed by each country. That is, China invests about $1 Trillion more than the US per year, but without considering how much more fixed capital the US is starting out with, you can't say how quickly the gap will close.

 

[Billy T]

You've edited out the most important part of the definition, which was the first sentence:

"Investment is defined as business investments in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. "...

I did not mean to distort or "edit out." Of course, every one knows that building a new factory of mine etc is investment, and I agree that is "true investment."

I quoted what I did to show that also in your investment are many things that are not even there the next day. The US is such a strongly market oriented, consummer driven economy, that most of your "investment" does not even exist a month later. Surely you will agree the the US is mainly a "service economy"

 

[Billy T]

... None of the money that consumers spend on entertainment, or food, or even appliances and electronics, is included in the investment figure....

Not technically is the ticket you buy to enter Disneyland counted as investment or the rent for your hotel room there, but the building of that hotel and that theme park sure is. Where do you think that money for that "investment" comes from, if not from the customers in the final analysis? The US is full of structures, like Sack 5th avenue stores (or Victoria Secret), ball parks etc. etc. and all this is in your "investment" data, but not in My "true investment" data. Look what China is building instead. Not things that entertain or better dress, etc. it citizens.

Do you really consider the plant that makes "hoola hoops" etc. an investment that will help compete with China?

PS it may be true that US's hoola hoops are actually made in a chinese factory. They earn dollars with hoola hoops, instead of entertain or fill their citizens surplus time. My point is that the US infrastructure is set up to entertain and dress in style etc its citizens, not make the country stronger. A market driven economy does this job well ,but not so well in competing with a guided market economy like China is creating. - Why do you think we are going deeper into their debt every year?

 

[Michael]

China 'to dwarf G7 states by 2050'

China's economy is projected to grow so fast that it could outstrip all developed nations by 2050, a report by Pricewaterhouse says

That`s interesting

 

[Billy T]

Michael's news paper reference summary of report is good, but read the full original PriceWaterhouse Cooper study at:
http://www.ukmediacentre.pwc.com/Content/Detail.asp?ReleaseID=1824

The projection that The purchasing power adjusted GDP of China will be 43% GREATER than that of the US in 2050, is roughly the same as my projection that China will pass the US in a couple of decades. (Chinese GDP greater than US by 43% is data from table B of PWC's study.)

Anyway, the fact that one nation is investing more heavily in fixed assets typically implies that said country doesn't have as many fixed assets as others. I.e., it is a developing country. This is certainly the situation with respect to China and the US. The US, and other developed economies such as Europe and Japan, already have huge amounts of infrastructure that they've built over the years. China, India and other developing countries don't have a comparable level of infrastructure, and so must invest a larger portion of their annual income into it if they ever hope to catch up.

I have already noted that same dollars invested in development in China buys a lot more than in US, but I now note that China is "buying" the world's best professors at very bargin prices - they are offering higher salaries, but did not pay for their years of education and training. Also China is getting back the students that were educated abroad at the world's best universities. ("Reverse brain drain" has started.) Yes, soon China will have "50 Harvard or better" university centers as they are importing them, while US is importing the cheap labor produced, low-cost shirts and shoes from China. Who do you think is gaining strength in this trade?

See my comments below about the US's "huge amounts of infrastructure" that show why that infrastructure will be a major part of the reason for US's coming economic collapse.

Beyond that, it's clear that the only investments you think have strategic value are exactly the kinds of things developing countries invest in heavily. This position will obviously result in the conclusion that developing countries are rapidly overtaking developed ones. I don't agree with that view at all, nor, I think, do many reputable economists.

I think an intensive study by PriceWaterhousCooper should be considered "reputable." PWC also thinks that the developing countries will surpass total GDP of ALL of the now developed ones. I quote from the report summary, web page given above:

"...By the year 2050, what the report calls the ‘E7’ economies (China, India, Brazil, Russia, Indonesia, Mexico and Turkey) will have outstripped the current G7 (United States, Japan, Germany, UK, France, Italy and Canada) by between 25%, when comparing Gross Domestic Product (GDP) using market exchange rates, and 75%, when using purchasing power parity (PPP) exchange rates..."

I.e., yes that is the "obvious conclusion," but you intended your comment critically because you assumed all would agree this "obvious conclusion" is false. At least PWC and I think it "obvious true." If US has collapsed, then instead of 75% greater, they will be 7.5 times greater. Brazil trading with developing countries is already approximately doubling annually. Soon no one will need or want what US can make as it will be cheaper from the newer factories with low cost labor. - In about 5 years, India will be exporting a rust-free, four passenger car for $2,200. Factory is now being built, by Tata Motors. Top speed will be more than 60/mph and at least 50mpg in city driving and 80 (or more) mpg on the interstates at 60mph. - Urban market is the main target. (In five years GM will be bankrupt and Ford will have filed its "chapter 11" to do the same.)

IMHO, the basic reason why above is "obviously true" is true is that Europe, and especially the US, have consumer guided economies that invest in facilities that entertain their citizens and put them in the latest fashions, etc. Whereas China and other centrally guided market economies are building national strength, and keeping their citizens from consuming/enjoying "the good life." The hard working citizens are too tired from long hours of working to build the nation to even think of taking a vacations, etc. US infrastucture is built on the suburbs and the car going to Wal-Mart, vacations, latest sports events (ball games etc.), rock concerts, etc. = "the good life," but in era of "peak oil" it will all collapse.

China learned from the economic failure of the Soviet Union's "planned economy"* and thus has a "guided market economy," not a centrally planned one.

Furthermore, you are not quite correct that developing cuntries are only investing to make up for fixed assets infrastructure deficits they lack compared to "advanced economies." The Chinese (with help of Brazil's Embraer) have just completed a factory (in Harbin) to produce passenger airplanes (50 to 150 passengers sizes) that probably are the best in the world in term of efficiency. They are making 30 nuclear power plants. Have mastered maned space flight. Have the world's only magnetically levitated train in commercial opperation, etc.

Wake up to reality. - US will soon be second rate, but have much better life style for its citizens, until the dollar collapses. The Chinese can provoke that collapse any time they wish. (Currently it is not in there interest to do so, as they have not allowed the purchasing power of the masses to benefit much from their great production capacity, so the goods they make must be exported. Note, however that they are very clever in what they are exporting - only things with no lasting value. I.e. US, by importing "Chinese junk" is loading the economic gun (China's dollar reserves) that China can fire at US when they wish to break the dollar's purchasing power - ability to buy oil etc.. All China needs to do to destroy US economy is to start paying $150/ barrel when global production capacity is starting to decline. - Then try driving your SUV to the empty Wal Mart or using your "superior suburban infrastructure" and badly neglected public transport system in poor urban centers.)

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*When USSR existed, I had interesting conversation, about "planned economies" with attractive economics student on train in Hungary. She had worked every summer in a tomatoe processing factory in old Soviet Union. One summer, her plant canned tomatoes and plant manager "exported" them to a factory in Bulgaria, to earn "ComiCon Credits", where the cans were opend and cooked some more, recanned and shipped back to her plant (earning "ComiCon export Credits" for the Bulgarian plant). Once back they were cooked some more to make catuchup, and again recanned. The next summer, she worked only 10 days as the central planners had not ordered enough lids for canning. The plan manager had to bribe the truck drivers delivering tomatoes from the state farm to haul them directly to the town dump. She read seven English books that summer, while sitting at her work station. (I could then speak some Russian, but her English was better. Train had all signs in three languages, but none was English.)

 

[quadraphonics]

I quoted what I did to show that also in your investment are many things that are not even there the next day.

No, for the last time, "investment" only counts FIXED ASSETS. These are things that last *years*, not consumables. Stuff like computers and phones aren't even counted, because it doesn't last long enough. The investment portion of GDP consists of houses, buildings, machinery, etc.

Also, if you think China isn't investing in luxury stores, retail goods and sports, you're way off. This is not the 1960s with a bunch of Maoist crash industrialization programs; retail sales and luxury goods have been going up, up, up in China for the past ten years. Weren't you just going on about the emerging market there? Seeing as they're hosting the Olympics in 2 years, I'll wager they're spending way more on sports facilities than the US is these days. Didn't they also announce a plan to wire the whole country for HDTV in time for the Olympics? HDTV doesn't sound like a strategic industry to me...

 

[Billy T]

No, for the last time, "investment" only counts FIXED ASSETS. These are things that last *years*, not consumables....

For the second time, we agree on this. What you fail to see (or admit?) is that the fixed assets of the US investment are mainly constructed to give "the good life" to US citizens (at least those with some money to spend). This because the US's is a "customer-driven" economy, producing mainly services for "the good life." For example, eat-out meals require restuarants, an investment we both agree. (Same true of convenient "frozen foods" "heat and serve" meals, home delivery pizza, etc. - When did you last eat a fully "prepared-at-home" meal? I.e. a meal made entirely from products that came from a farm rather than a factory? - that factory was typical of US investments, made for your convenience or "good life," not to strengthen the nation or for export. If you are less than 40, I bet you never have.)

Most US investments are for "the good life" - investments made in an economy with an infrastructure assuming the private car and cheap gasoline.

China has invented a Market Economy in that they let the market determine what will be produced, rather than micro manage economy with central planning of production as USSR did, but the CP leadership "guides" the economy so relatively little is produced for the consumption of its people. (Little is produced for "the good life" of the masses).

Most of China's production (and of course, the associated investment) is for export and building the strength of the nation etc. (This for the last time also.) They supress the natural desires of the masses (for vacations, status items, stylishes clothes, etc. = "the good life") via propaganda and information control.

Some are "more equal" than others and not subject to these controls/limitations. Indeed they are enjoying a very good life, on the backs of the hard-working, exploited, uniformed masses.

This post certainly will not be found by google.com.cn search.