China – the new America?

July 23, 2007 at 7:28 pm Leave a comment

It’s interesting how in the span of less 12 hours, I’ve seen news articles, one claiming that China, a self-proclaimed communist country, is more capitalist than America is, and another stating that China is to overtake Germany as the third largest economy!


China’s landscape of high-rise buildings

According to the Gulf Daily News, China’s GDP rate is expected to be close to 11% by the end of this year, and has no expectation of slowing down. This is likely to surpass the GDP of Europe’s largest economy, Germany, in current US dollar terms, making it the third largest economy in the world. This has led to concern that overheating of the economy could lead to a possible financial crisis. The Central Bank have responded to these concerns, raising interest rates twice this year as well as bank reserve requirements and export curbs. However, if global demand for China’s manufactured goods remain as high as expected, there is little that the government can do about it.

I wonder if there is a correlation between the size of the country and its economic prosperity. Sure, the larger a country’s population is, the greater the likelihood of poverty being present. But it is fascinating at to how two countries with huge populations – China and India – are soon overtaking the world.

Could it be that in countries such as these, there are two extreme economic conditions that could exist – extreme poverty, or extreme wealth – and it is only a matter of time, as implied by the Solow Growth model, that poorer countries will catch up? I think it would be naive to make such generalizations. After all, tiny islands like Singapore are flourishing economically, but then again, they did have incredible leaders who strove to turn the once poor nation, into a Tiger economy. Nevertheless, it would be interesting to see if the size of a population in a country has an effect on economic prosperity, and if so, to what extent.


Entry filed under: China.

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