The temptations of extrapolation are hard to resist. The trend exerts a powerful influence on markets, policymakers, households, and businesses. But discerning observers understand the limits of linear thinking, because they know that lines bend, or sometimes even break. That is the case today in assessing two key factors shaping the global economy: the risks associated with America’s policy gambit and the state of the Chinese economy.
Following World Bank projections that China will become the largest global economy based on purchasing power parity, William Yu contends that better economic ranking indicators exist, like market exchange rate. Using this measurement, where U.S. GDP was calculated at $17 trillion compared to China’s $9.1 trillion, China’s economy is expected to surpass the U.S.’s sometime in the next two decades.
Recent reports on China’s GDP are based on an overestimation of China’s purchasing power parity due to different calculation methods, writes Niu Li. While China’s aggregate economy is very large, it must continue to build up its service industry and increase domestic demand rather than solely focusing on the quantity of economic growth.
After Luo Zhaohui, China’s incoming ambassador to Canada, labeled Canada’s foreign investment rules as “negative” and called for “some kind of changes” to the nation’s trade policy, Hugh Stephens examines why bilateral trade relations have declined and what Canada and the United States can do to promote greater investment from China.
Is Cuba actually following the “China model” of economic reform and development? While Cuba indeed has been influenced by China’s rapid economic growth, Fernando Menéndez argues that Cuba’s moves are a retreat by the state from certain economic activities, it is still far from the Chinese model.
Despite predictions that the Chinese economy will overtake the US in 2014, China will still remain world No.2 for years, writes He Weiwen.
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