China still needs to strengthen domestic economic issues before it overtakes the US

By Hu Weijia Source:Global Times Published: 2017/2/8 0:05:54

Will China and India become the world's economic leaders by 2050? The answer from PricewaterhouseCoopers (PwC) is yes. According to its latest report, China could be the world's largest economy in purchasing power parity (PPP) terms by 2050, with India in second place and the US in third.

This is not the first time such an analysis has come out, but this report has triggered commentary on social media that China will take over a leadership role in trade and climate change due to US President Donald Trump's "America first" policies.

China has achieved great success in bolstering its economy's growth and now the country contributes more than one-third to world economic growth. An inevitable result of China's rapid rise will be subtle changes in the global power structure, although it will be a very slow process.

The country has to remain vigilant and avoid getting sidetracked due to sweet talk or compliments. PwC's report said that China has already overtaken the US to be the largest economy based on GDP in PPP terms. This sounds like exciting news for the Chinese economy. However, there has been much controversy over how much faith can be placed in the accuracy of the PPP model which calculates GDP by using exchange rates and takes into account price differences of the same goods between nations, as China's GDP in PPP terms conducted by different organizations yields different results.

Even if China has surpassed the US by economic scale in PPP terms, we should note that China's overall economic strength still lags behind the US. People should be aware that the country is still considered a developing country if they look at other criteria such as GDP per capita.

China should remain sober and work on solving its economic problems, which range from a widening income gap to local governments' massive debt. Additionally, the current economic downward pressure heightens the need to further step up supply-side structural reforms and economic restructuring.

It is unlikely that countries like China and India will replace the US anytime soon. Developing countries will have a more active voice as global economic power shifts to emerging economies. Meanwhile, the world economy may suffer a serious blow if the US pulls out of globalization. To prevent that from occuring, China and the US will have no choice but to cooperate.

The author is a reporter with the Global Times.


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