Jim O'Neill: China could overtake US economy by 2027

More like by 2020 or faster, much faster ... if U.S defaults then maybe by 2017 ...

world will survive till then?

Articles like these assume that China can keep its growth rate up. There is one major problem with these kinds of projections. China has basically saturated both the USA and Euro markets and there are few areas left to grow into. It has to develop it own local markets and that is easier said than done. They have problems in the local market that the West cant even dream of. For example 1.3 billion people. If China mordenizes where do they get jobs for these people. In other words what do you do with unemployed people after you upgrade your industries. I do agree that China needs to be invited to the table of G7 countries and be more involved with the world community. Just some thoughts.

Hey Bob,

That markets are saturated is uncertain. I believe imports to the EU were up 38% and the US 29% just last year. Then you think the high tech (really medium tech) potential for Chinese industries. For example, China is starting to take market share on things such as ships, buses and earth movers. And although the West represents half the world economy, it is the least vibrant half. And then there is domestic consumer spending... up about 16% every year for the last 5-10.

The other thing about projects like this is they also assume the US will continue to grow and the impact of currency movements. Lets say The US continues to move forward with 0% growth and all this printing bites them in the ass with a 50% depreciation of the USD over the next 10 ten years. Provided the RMB is pegged to a basket of currencies (as it was in 2006) then the catch up date could be moved forward to about 2020.

you should see what the Chinese are doing in Africa, major projects never seen before ...they are basically controlling most the natural resources especially metals,minerals and precious stones ensuring their growth for decades to come.Its the USA that's in perpetual decline...just as all the kingdoms fall...communism will rise again and welcome Armageddon.

To keep up their growth rate last year, China borrowed enough money to match 1/3 of their GDP. That is not sustainable. Certain industries will be hitting their limits soon or already have, for example real estate which makes up 10-15% of its GDP has gone has high as it can and is now in a downturn. Auto industry has hit its limit in many cities and the govt. is limiting the amount of cars that can be sold every month. Infrastructure projects are slowing, you can only build so many bridges to nowhere. I am not predicting China cannot keep growing, I am predicting they just cant keep this pace up which articles like this use in their assumptions. There are some nasty bumps coming down the road which will slow things down.

Almost certainly. But to prove the predictions wrong the bumps to China need to be worse than the bumps to the US.

Anyway, in Forex we know that any specific target is almost always missed. And China (as usual) has a few major problems that look unsolvable. But still, I see help wanted signs in the windows of both Chengdu and Beijing.

I look at the streets here in Nanning. When things are not going well in the factories there are a lot of people who are on the streets looking for temporary work or are setting up street bazaars. I dont see many temps yet but there are tons of new bazaar peddlers all over the place. That means people have been earning money but now must fend for themselves so they can afford a cart and put a bunch of stuff, fruit, goods and go out and sell. So I see a slowdown but not serious at this point. The last time I saw this there was eventually a very large unemployed group of people and they were getting restless. The govt. went to a lot of factories and forced the owners to pay their employees or paid them directly themselves. It then went down the road of borrowing to finance projects to keep people employed hoping the West would come back from the recession. That plan doesnt look like it is going to work with the Europe in deep doo doo. So we will see what happens next. I do understand that China is not out of options at this point but to sustain its growth rate is going to be extremely difficult.

Last summer I did a motorcycle tour of southern China. I was amazed. When I was last there 6 years ago, poverty was everywhere. Now... relative prosperity ... with the caveat that by American standards they are still dirt poor.

I have some familiarity with Bazaar peddlers, having run a wholesale business in Taiwan which, among other things, sold to peddlers who retailed in the local night market. At that time and in that country a peddler would make about 4-5X what they would make in a factory and about 1.5-2X what they would make in a office job. So while street people and beggars are a sign of poverty, peddlers, not so much.

Yah that is why I said not serious at this point but the numbers are way over normal so I look at that as significant. They came from some where all of a sudden all trying to sell the same kind of stuff on the streets. I know that the demand for those products are limited so someone isnt going to make money. I will watch and see where it leads for now it is something to notice and see where it goes.

You could be right. I have noticed an upspike in street peddlers in Beijing as well. You are right, they are all selling the same crap, and they don't look that well off. And selling on the streets of Nanning in winter is one thing... sell through a Beijing winter is quite another. Taiwan is good starting point for any analysis of China, but at a certain point it breaks down because the regulatory system is so different.

If things go bad you will see the construction people next on the street with their equipment looking for work. The numbers you see will tell the real story not what you read in the press. Back in 2008 they actually walked around in small gangs hanging around in parks and street corners. They didnt cause any trouble but they made people nervous. Then they just disappeared as the govt. borrowed money to get startup projects going again.

Interesting. I think 2008 unfolded very different in Southern China than in Beijing. I also pay attention to the help wanted signs. I figure they have to disappear before I start to worry.

what a moron...there are about 500 Anal-ists who have stated this before him...like this is something new...LOL

This is my China economy barometer, Guangxi is one of the poorest provinces in China. It is also mainly made up of minority groups of Chinese. When they want to work they travel to other provinces and are the factory sweat shop workers. When these factories start laying off people or they are not paying them they start to come home. The ones that have some savings will buy a cart and go sell something, fruit, knick knacks, etc. The rest will go to public areas and just sit around and talk. That is the most accurate economy indicator I know in China. Right now the cart sellers are here which seems to mean the better paid ones got laid off first or they have the money to buy a bus or train ticket to get home. The rest are either still employed, waiting to get paid, or are walking back and will show up on the streets later. That is my Chinese economic forecaster and it works very well. If the real estate bubble has truly burst, the construction workers are coming home first. They are the ones that make the most money of that group because they have some job skills. The question is, are the others coming also? I will let you know as time goes on.

LOL-- China is actually engineering (centrally planning) an economic slowdown, so I'd say that if ever China overtakes the US... it will be on account of the US economy SHRINKING.