China’s Goal To Become World’s Largest Economy Back On Track

China’s drive to become the world’s largest economy appears to be back on track again. The Organization for Economic Cooperation and Development raised its forecast for GDP growth in the world most populous country to 7.7% for this year. The agency’s estimate in March was for a 6.3% expansion.

The improvement indicates that China’s $585 billion stimulus package is working. The US cannot say the same of its $787 billion program. America’s GDP is still dropping, and may be down by as much as 3% this year.

Many economists expect US GDP to begin to become positive again next year. But, some experts believe the expansion after the deep recession to be modest with growth in the American economy no better than 1% or 2% for the next several years. The causes of the anemic recovery are likely to be high unemployment and low business and consumer spending. The Administration has forecast GDP growth of over 3% next year and over 4% in the two years after that. The current federal budget and stimulus packages have those numbers as key assumptions, but those assumptions have already become unrealistic.

China’s GDP is over $4 trillion according to the IMF and CIA.  America’s is over $14 trillion. If the American economy stalls, China’s GDP could be half of that of the US in a decade. In two decades China’s could be larger.

It looked like the Chinese economy might falter, and it may still. Its critical export engine slowed late last year and early in 2009 and may continue to be in trouble. The nation’s stimulus package appears to be offsetting that by encouraging building, lending, and consumption among China’s huge middle class.

The Chinese program to become a premier world economic power has apparently not been derailed by the recession. It may even use the recession to pull ahead of its rivals, Japan, Germany, and the US.

Douglas A. McIntyre