Why China will not become the largest economy

Sabrung : you are right there. Infact they are now trying to woo the Indian entrepreneurs and industralist. Don't want to depend solely on China. Handful of Indians have brought coal mines which will last at least 50 years. No to India for uranium though.

crispy duck and prawn balls?

to know the real score! What is seen outside is not the real China!

One thing is for sure the products made in India will have a better shelf life (and prob bio-degardable), in case India ever get industralized to that extent - like China. I don't see it happening in the next couple of decades though. India is hoping more to sort out its internal issues and improve the life of general public than increasing its export. Atleast that's the impression I have.

Painther--soon (10-15 years) it will be cheap Indian goods flooding the Chinese markets :-)

F'man,

on PS: agree on 200 years; but lets not forget US history is "just' few hundred years while Asia has thousands of years of history with many ups & downs. IMO, it's not going to be just a blip of 200 yrs, it'll probably be a war of survival :)

Yes, its US rhetoric to evaluate RMB in open market terms (china is intensely keeping it low valued to boost their exports and grow their economy). US’ business interests are suffering from this.

India may have disparity benefits with dollar but not with Chinese; they too have business losses (Indian market is flooded with cheap Chinese goods killing Indian entrepreneurs).

Painther--of course cheap labor is not all that matters. Look at Sweden and Norway. But for the Chinese economy it is crucial (that and the states ability to control it). These two factors are the foundation of the Chinese economy, which is NOT based on innovation. The Chinese are trying to diversify into an innovative economy--hence the rise in patents, and massive investment in science education. I don't think China will make that transition in time, and its savings rate will decline as the population ages (just like in every other country).

And how is this US rhetoric? The US does not benefit from this. India is the beneficiary.

PS. The Western dominance of the globe's finances was a two hundred year blip. For the rest of human history Asia dominated, and it is inevitable it will again.

I also don't agree with CNN report, its more of a routine US rhetoric (they failed to persuade chinese on currency issues and are frustated, it seems)-

Chinese are marching ahead, it seems (I may or may not like personally thats another issue :P)

exerpts from http://www.thehindu.com/business/article1695982.ece

In the 20 years since 1990, the United States’ share of the world’s gross domestic product has shrunk from about 25 percent to 20 percent, and the figures were similar for Europe.

In the same period, Asia’s share of global GDP had risen from 25 percent to about 33 percent, led by China, whose current 13 percent is rising and likely to surpass Europe within five years and approach the U.S. chunk within a decade.

Asia’s share of the world’s financial assets is also growing, again led by China, where economic growth has helped make China the world’s largest saver, with an estimated $3.2 trillion in deposits, and its largest investor, with an estimated $2.9 trillion gross investment in 2010.

F'man, disagreement on labor being central to economic growth, I think it's 'innovations' while other factors, including demographic, can play supportive roles.

if demo. is key then even Africa should have excelled far ahead by now.

when Obama asks his students to be careful of Chinese & Indians, he means to sustain the knowledge base which US has created in last century (which appears to be shifting eastward).

Painther--I'm not sure what we disagree on. What you have written doesn't clash with what I am saying. I would just add that China's current wealth is heavily dependent on cheap labor. Innovation, education, etc. are limited as a portion of its GDP. My argument is that demographics will stunt Chinese growth and accelerate unnaturally to the shift to India, preventing China from reaching its full potential.

PS Most of Europe's "innovations" of the period you site came from adapting Indian and Chinese labor techniques and technology.

disagree with many and totally with F'man :)

a country's economy excels not because of its labor is 'cheap' but because it has "Innovation" which comes through good education, sound social conditions etc.; thats why economic growth is always clubbed with all other eelated growths, military, sports, other societal growths...

cheapest labor is in Bangladesh so does it make B'desh economic powerhouse??

when rest of the world was fighting with arrows guys in Europe were discovering dynamite...see in 16-19th century almost all innovative ideas came from Europe (they ruled the world too), 19th century onwards almost all inventions come from US, ......future is always OPEN to anyone to dare to dream BIG, equipped with latest knowledge.....

for sure its not Europe & US...., I bet it's chinese followed by Indians

Mom_me--India does not benefit from chaos in China (no country tied to the global economy would given China's size). India benefits in the long-run if Chinese labor costs go up (which they are due to demographics and the growth of materialism in China). The evidence of that growth is seen the rising number of worker riots and strikes--invariably over more pay and benefits, not political ideology.

The rising cost of labor makes other countries more attractive. India's population is younger and growing much faster than Chinas, which means its poorest working classes are likely to stay poorer. Within 10-20 years the industrial base will naturally flow to India as it did from places like Japan to China. Yes Japan still makes stuff, but the cheapest manufactured goods shifted to China because of labor costs. Before Japan there was the US and before that their was Europe.

s_isale--China will not fall. Its economy is merely evolving like everyone else's. These are merely the growing pains.

India does have the advantage over China in terms of younger workforce but the factors which initially made companies select China over India still persist. The bureaucracy, red-tapism, delays, strong labour unions, lack of adequate infrastructure in terms of connectivity, power etc. are still there.

if China falls will US and Europe be far behind?

Chinese are very reselient, they'll recoup even after loosing millions of dollars.

Frienchieman : how do you think India has anything to gain from this choas ? We are still catering to our domestic markets. We don't aspire to be exporters like China.

Flor : India has a very different economy. Unlike chinese, Indians have a spending power. For every product China makes for the western countries it dumps a similar chinese version in its market priced 10 times lesser, but its economic model is so flawed thanks to the chinese politburo (sp?) chinese just cannot afford it. Probably you are aware.

Britexpat: there are painful internet and you tube restrictions in China. I reread my carrot statement above and I realized my patronizing tone. Sorry, it comes from being in teaching profession.

Any hiccups in Chinese economy will hit Australia hard, as it had successfully position itself as the quarry that supplies chinese factories. Not a bad move since it is what largely save Australia from the GFC that took the US and Europe economy down.

If China, its biggest costumer, is slowing then the resource based economy of Australia will almost certainly be badly affected....

China gets there in leaps and bounds and is the shining star at the moment and the country is run like a factory with no democratic values or respect for human rights or lives but India will get there slowly but surely at its own pace and in its own time in keeping with its democratic values and respect for its people

Any major instability in China is bad for the US economically. Hence the US does not provide the sort of support for Chinese protesters as it does for those in some other countries.

Any major instability in China is bad for the US economically. Hence the US does not provide the sort of support for Chinese protesters as it does for those in some other countries.

I was talking about a "destabilsed" China.. Not neccessarily to do with free market economics. Strife in China means that China focuses on internal issues a lot more, rather than on external matters..

jpa--By Westernization I mean the materialist, capitalism model of consumption. For those who are paying attention (obviously not alter dusty), they would know that the Chinese workers are increasingly protesting for better pay and conditions and the rich-poor gap widens in China. The aging Chinese population will place additional strains on the welfare state.

The model is very simple. Look at manufacturing in almost any Western country: workers develop greater aspirations, work harder and more women start working, birth rate declines, places higher demands and stress on the next generation which demands more pay to support aging population. That's why the West lost its manufacturing base in the last century, and the only Western nations with growing populations are growing due to immigration.

Flor--It won't happen in India for the foreseeable future because India's population is substantially younger than China's.

Britexpat--Your thinking like a mercantilist, rather than a global free market capitalist. A destabilized China would be ruinous for the US. The idea that the two are in some sort of economic competition for limited resources is exactly the sort of crap joke Alter Dusty is talking about. No real economist has thought in those terms for almost two centuries.

a crap joke circulating over cnn, fox, economist for longer period of time.

Surely, it is in the best interests of the USA to have a destabilsed China..

As for India, it still has a little way to go - but will surely become one of the big four.

that possibility to happen to China will not happen to India as well?

Frenchieman, do you have eyes smaller than the chinese? How could you come up with the following extremely out of the tune comments.

"Westernization will prevent China from achieving its dream of becoming the top economic dog."

"China is facing a demographic nightmare in about two decades--consequences of the one-child policy."

As soon as Chinese exports become more expensive, production shifts elsewhere. China is facing a demographic nightmare in about two decades--consequences of the one-child policy.

Britexpat--why is is this wishful thinking? Chinese chaos is bad for the US, but good for India.

Workers demanding better working condition will not bring down the Chinese economy. At most it will make their exports a bit expensive but still they are way cheaper than any competitor and the Chinese can manipulate their currency again as they have been doing for a while to keep their exports competitive.

Brit, chinese have put the lazy tibetians to work. They know how to squash the disgruntled workers - old carrot and stick technique minus the carrot.

If China goes down, America will be the most affected. Both economies are interdependent.

A bit of wishful thinking from CNN methinks.

They have access to social media and internet. However, this is normal for a developing nation. Workers will demand better rights and wages.

Westernization ?, this is a puzzle. No western TV channels in China. Most people don't understand english, so where are they getting influenced from. The chinese immigration is very strict, it does'nt allow any literature which goes against the government.