China is approaching the US GDP very fast. The real growth is I think about 6% faster, inflation is a 2 tot 3% higher and the yuan was appreciating with about 3 tot 5% a year. Together that is a lot and nominal GDP of China could surpass the US nominal GDP around 2020. Ferguson thinks it will go even faster (he is more negative about the US).
But is that going to happen? The yuan is no longer appreciating. Worse, China is now fighting the middle income trap , and 85% of the countries did not manage to win that battle. China must undergo a transition from an export and investment driven economy tot a consumer driven economy. For the time being the signs are favourable. The wages rise rapidly and people want to consume more, the middle class is buying everything.
China is overinvesting in a terrible way, not seen before in the world (China invests as much as the US and Western Europe together) and this will go all right only for a few years. The Chinese government tries to stop the overinvestement, but this is a nearly impossible thing to manage. Around 2018-2020 it will go wrong in a terrible way. Just like in Japan after 1990 investments/ GDP will have to decline substantially for a long period. The demographics are already bad at the moment (after decades of tremendous growth of industrial labourers and fast rising population after 2015 we will see a decline in the labour population and no inflow from ex farmers). When those overinvestments become bad investments that will cause a real recession in China (not lower than 6% growth, but lower than 0%). This will cause a recession in the entire world, the first China driven world recession.
China is not flexible enough to invents its way out so it wil last long.
The growth of the US in US $ will be quite often be higher than that of China in that scenario. Population growth in the US is high, the US is much more innovative, profitability is beter and more solid. When the bad times in China will last too long it is even thinkable that the US GDP in $ in 2100 is higher than in China. The population of China will decline from 1300 million to maybe 950 million and the population of the US will grow from 320 million to about 500- 550 million in 2100. It is definitely not unthinkable that GDP per head in the US will still be double that of China in 2100.
