Comparing the Chinese and American economies


For decades, America had been by far the best economy in the world. However, several reports from the media suggest that China is fast catching up with the US and some say China has already eclipsed America as the world’s largest economy. a number of factors have been put forward to explain why this is the case, many conclude that it is due to the economic policies enacted by the Chinese government which favour foreign companies to establish their firms in the country while many also suggest that it’s all down to a freer China which is no longer as conservative as the China of before therefore instilling confidence in the business sector to move into the country. An example of this can be seen in how the country now allows things such as online gambling as there are many online casinos such as that operate in the country. In addition, the country was one of the very first to adopt cryptocurrencies.

Gross Domestic Product

The World Bank states that over the past two and more decades, the US-dominated when it came to the Gross Domestic Product (GDP) accounting for over 25 percent of the world’s GDP. While the US still reigns supreme in that area, it now accounts for less than 15 percent. China, on the other hand, is fast rising with its GDP rising by over 10 percent in 2016 from 1990.

Purchasing Power Parity

According to the Centre for Economics and Business Research (Cebr), China now ranks on top of the US when it comes to the Purchasing Power (PPP) Parity rankings. As recent as 2010, the US was still the leading country when it came to PPP but indications are that China will dominate on this front for some time to come. In simple terms, PPP pertains to how your money can stretch. In practice, it means if both an average middle incomer in China and America earns the exact amount (on the conversion rates) in their own currencies, the person in America will use all of his money faster than the person in China even if they both purchase the same things. This, on the other hand, means that the cost of living is on the rise in the US.

Population Growth

The link between population growth (and decrease) and economic development is still a blurry field as many studies conducted in the past have failed to establish a common ground. However, the assertion at the moment is that indeed population growth does lead to economic development especially when it comes to the question of a large pool of labour force and top quality human resources. China’s population currently is at least four times that of the US. China has an estimated 1.4 billion people in comparison to the US’ 320 million. This means that if there is a direct correlation between population growth and economic growth, then China is certainly going to keep on putting pressure on the US economically.