China: In Every Crisis There are Opportunities

PERSPECTIVES: Evolution's Ian Harwood looks at the factors which may impact everyone’s favourite guessing game of late – when will China become the world's largest economy?

Ian Harwood, Evolution Securities, 1 February, 2011 | 3:49PM

From time to time, Morningstar publishes articles from third party contributors under our "Perspectives" banner. Here, Ian Harwood, Chief Economist at Evolution Securities, discusses what he calls the "key business, investment and policy issues for the world" today -- China's continuous growth. If you are interested in Morningstar featuring your content, please provide your details and/or submit your article here.

The key business, investment and policy issue for the world in general is the future health, or otherwise, of the Chinese economy. Now the world’s second largest economy, and the most populous (with even more people than India), China is currently experiencing the most extensive industrialisation, urbanisation and construction project in history. Crucially, no end to this process is yet in sight.

During the course of the past three decades - following Deng’s pro-market reforms of the late 1970s - China has been the world’s fastest growing economy, its GDP expanding by an average of almost 10% per annum. Growth at such a pace means that the absolute size of the economy has doubled every 7-8 years. And, significantly, in 2010 China’s GDP overtook that of Japan, making China the world’s second largest economy in current dollar terms (it had surpassed Japan in PPP-adjusted GDP terms quite a few years previously). A favourite guessing game is speculating how soon the size of China’s economy will exceed that of the US. Indeed, The Economist magazine recently launched a website model which allows people to input their own GDP and CPI projections to obtain an answer (www.economist.com/chinavusa: the magazine’s own guess is 2019).

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