Topic 22: The Economics of China


The buzz right now is China. Everywhere you look in America you will see warning signs about China. I don’t want to make you feel more or less scared about this. Personally, I don’t think there is anything to be afraid of. If (when) we do drop to another country economically it doesn’t mean America is over, it is just a change. Anyway this post is to talk a little economics with all of you all about China so maybe you can better understand what people are saying when they are talking economics.

China recently became the second largest economy in the world by GDP. GDP stands for gross domestic product. It is calculated using the folowing equation:

GDP = C + I + G + (Ex – I)


GDP = private consumption (consumer spending) + gross investment + government spending + (exports − imports)

This is usually the barometer economists use to measure success of a country. Recently (last year) China overtook Japan as the world’s second largest economy based on GDP. They are still extremely very close in terms of GDP, but Japan’s economy is pretty anemic in terms of growth while China’s is growing at 9% to 10% every year.

In terms of economies (GDP) as of 2010 the world looks like this:

1. USA  – $14,657,800,000,000

2. China – $5,878,257,000,000

3. Japan – $5,458,872,000,000

As you can see as of right now Japan and China are very close, but the US is over DOUBLE China. It is going to take China a while to catch up, but looking at how poorly the US economy is performing we have very little growth in comparison. If things continue on as they are currently China will overtake the US for the top spot within the next 20 years.

Like I said this post isn’t to debate the merits or consequences of this, just to inform. I encourage you to do your own research because whether you are into economics are not it will have a direct impact on your life.

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