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raymondusa (raymondusa)
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China will return to the top, as #1 economy by 2017

On what basis will China return to the top?  Not by the misleading per capita income, but by PPP adjusted for existing balance sheet and income statement basis, which better reflects the true health of an economy.

I’m pleasantly surprised others mentioned PPP.  Usually, the people talking economic will use GDP per capita as their best and only argument, like that covers everything.  But GDP per capita leaves out many very important details, that are salient to calculating the real economic healthy of a country.  Don’t confuse the size of an economy with the health of an economy.

The most often quoted number is $35,000 per capita income in US.  That sounds great if that is the only information you know.  But once you factor in the debts of $8.4 trillion, unfunded liabilities between $45-$70 trillion, and the current population of US at about 300 million, the per capita debts is between $178,000 to $261,000 per US person, making the $35,000 income per capita look like chump change.  Some people don’t know the debt numbers so they gain false solace thinking everything is great.  Some other people know the debt numbers but ignore it, since truth isn’t what they want to present.  USA has an illusion of wealth built largely on debt, from government, private sector, business sector, consumer credit, mortgages, etc.  But Central Bankers around the world are increasingly alarmed at these obscene debt ratios, and are beginning to slow down purchases of dollars, and rebalancing their portfolio away.

Beyond GDP, a PPP adjustment improves the economic forecasting.  Other factors to take into account are the balance sheet and income statement items, specifically, all outstanding forms of debts, and deficits.  Since China has very low debts, and very high savings (about 45% of GDP), it has attracted many in the world to do business with it, since other countries can see domestic consumption by China, as a way to buttress their own economy.  Focus only on GDP per capita income, is misleading, since the health of an economy is much more than just that.

China accounted for almost 25% of the world’s economy in 1800’s, and was the number one world economy back then.  History will repeat, as China will return to the top this century.  China is already the second largest economy in terms of PPP.  If you factor in real balance sheet and income statement items with PPP, China will be the number one economy around 2017, and perhaps even sooner.  Why?

US is stuck with huge and increasing debts, as a result of fiscal and monetary irresponsibility by our government, and stuck with higher cost post 9/11 to cope with terrorism and homeland security. When Bush took office, the national debts were about $6 trillion.  It’s now currently about $8.4 trillion, and at current deficits, it will be $9 trillion by the end of this year.  This doesn’t even including the off balance sheet, as additional cost for the war on terror.  The projected cost for just the unfunded liabilities from Social Security and Medicare, is estimated at $45-$70 trillion dollars (Range has to do with actuarial assumptions and whether the baby boomers will all live to, or beyond their actuarial life.  This is possible since medical science is improving life expectancy).

In summary:  Some economist project China becoming the number one economy by 2017, not on a misleading per capita basis, but on a more accurate PPP with balance sheet and income statement basis, since GDP doesn’t pay the bills, revenues do.  PPP, balance sheet, and income statement are better as it reflects revenues and expense, liabilities and assets.  When you factor in these items, 2017 is not only possible, but as US debts continue to skyrocket, economist should revisit the 2017 projection, and revise it to reflect the additional cost post 9/11.

2006-4-6 02:59 PM

aquitaine
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QUOTE:

China accounted for almost 25% of the world’s economy in 1800’s

It was before that. By the 1800's the Qing dynasty was becoming increasingly unstable, mainly because it couldn't adjust. By the time of the Opium Wars and when the Qing dynasty collapsed, it only accounted for 5%. When Mao took over, it was (IIRC) 3%. Then when Mao died it was at 5%. Now it is (again, IIRC) at 15% and growing.

I don't put much confidence in things like this because there is quite a lot that can go wrong for China. Increasing amounts of civil unrest is one such thing.

2006-4-7 12:37 AM

raymondusa (raymondusa)
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aquitaine:

You may be right that it was before the 1800’s.  I remembered reading Chinese History and how Chinese banks helped finance the westward expansion of the US when it helped US build the railroads.  But my main point wasn’t to focus on the exact years, but to say China was the top economy at one point in world history, so what can be done in the past, gives credence that it can be done again in the future.  Past history may not predict the future, but if it could do it in its past, its reasonable to feel it can do it again.  That is better than a country that has never achieved that status in world history.

The main point is not to focus only on the misleading GDP per capita, since it leaves so many details out.  Use PPP, with real balance sheet and income statement, to better reflect the true health of an economy.  Focus on the health of an economy, instead of the size of an economy.

Quick example:  GM is the world’s largest automaker.  Sounds great if that is all you know.  But when you dig deeper, you find GM is also in huge debts, dangerously close to insolvency where corporate retrenchment, which isn’t the same as revenues from operations, is masking some of the mistakes and problems ahead.  Size didn’t help GM, and it will not help the US economy if it doesn’t fix its own problems.  Some people look for scapegoats to blame because that is easier than accepting personal responsibility to fix the problems.  Blaming others can also give them false solace that they are okay, and others are the problem.

I’m not predicting a perfect return to the #1 economy, since transition pains are evident.  As China is see a growing disparity between the rich and poor, we also see this growing disparity in other countries like USA, too.  The Chinese government will need to balance the economic growth of the country, and manage these disparities by funding more educational opportunities, and some socialistic redistribution of wealth and opportunities to the rural folks, to uplift the entire country more uniformly.  I see that happening with taxing policies and greater commitment to education to help narrow this gap.  It’s not perfect, but comparatively speaking, China should be proud of its achievements, but not complacent to rest on it. Something tells me the Chinese culture will not allow complacency to undermine it.  Confidence?  You bet!  Arrogance?  Perhaps view by those jealous of China’s success.

Of course you don’t put much confidence in this conclusion, because it is inconsistent with what you want to see.  I understand.  Jealousy is a bitch, and yet, it doesn’t change these facts.  I’m only the messenger, sharing facts so others can see a perspective that they may not see, instead of gaining false solace from misleading information, and drawing wrong conclusions.  I’m not predicting that is will happen for sure.  No one can do that.  But when you look at the analysis and consider the salient issues I’ve raised, reasonable people who understand economics and finance should come to similar conclusions.

[ Last edited by raymondusa at 2006-4-6 09:39 AM ]

2006-4-7 01:36 AM

aquitaine
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You are right about GDP figures being mis-leading. But like I said, there are many challanges ahead for China. Another one that is increasingly putting a drag on the economy is the environment. Corruption is also a huge issue, and one party rule does little to help. How well the government deals with these issues will determine how successful China will be. Sink or swim, we will see.

2006-4-7 02:14 AM

greendragon
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Mr. Raymond....take it easy.....2030 is the date...

why so hurried.....
it is 2030.....it takes time to urbanized...
it takes time to build up water treatment, water recycling, power plants..etc. etc.

and it take time to "fenced in"...."han traitors"......
who want to mislead Chinese people to obscene culture....

I say 2030!!!!!!

have a nice day!

Green Dragon

2006-4-7 12:03 PM

raymondusa (raymondusa)
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greendragon:

Don’t get hung up on the year.  I wrote this article to correct several misleading information posted here in this section.

Some people like to quote $12 trillion US GDP, like that means it’s a healthy economy.  But GDP is not the same as revenues.  2005 revenues were just over $2 trillion, with US borrowing over $2 billion dollars per day, just to keep the government running.  Another words, there weren’t enough revenues to pay the bills, and therefore, there is a deficit.  Yet, some people will use GDP only, and proclaim US economy is doing well, since it has the highest GDP.  There are many problems with calculating GDP as it’s misleading to imply that this is an indicator of standard of living or health of an economy.  A quick list of problems include:

Unaccounted black market economy
Bartering
Price indexing GDP numbers so US creates more investments, statistically lowering inflation
Doesn’t take into account cross border trades within companies
Currency differences and purchasing power parity
Doesn’t take into account savings in a country by its people
GDP figures go up if one is willing to spend borrowed money like the US, and not save
And more, but I think you get the idea

PPP  is an improvement since it tries to estimate the exchange rate to equalize the purchasing power of different currencies.  But that is still inadequate to measure the true health of an economy.  Add the information from a country’s balance sheet and income statement, and now you are getting closer to a truer picture of it economy, and whether it is healthy or not.

In summary, the more general information people use, like just GDP, the greater the disparity between US and China.  The more relevant financial and economic information they include in their calculations, the lesser the disparity between US and China.  Therefore, the issue isn’t if it’s 2030, or 2017, since I didn’t post this to debate about the year.  I posted this information to correct some misleading information by others, and give more facts to support my estimation.  Notice 2017 is not when I think China will surpass US by GDP, but by PPP with balance sheet and income statement information included.  Time will tell if I’m right, or if you are right, since we both don’t know right now.

2006-4-7 03:54 PM

asmanthink
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no, no, i say 2010

we need to hurry up

you cheap cheats!
haha.......

2006-4-7 06:14 PM

doberman (Andy Dob)
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PPP

Raymond is right bringing PPP to adjust the image of data , when all had been translated earlier from the real RMB figures to us dollar figures describing the innereconomy of China.

Ray.
I opened a thread, in which I asked people , whether my view is right, when I say, that the Rate of Exchange, freely adjustable by Chinese side, as RMB is not openly challenged on the financial market, is the artificial , political/economical leverage , which China set to get veeeery favourable environment in export/import.

What is your view oin this subject?

2006-4-7 07:24 PM

psikeyhackr
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Missing Numbers

Economists don't talk about depreciation of durable consumer goods either. There are 200,000,000 cars in the United States. Machines wear out, therefore they depreciate. That should be subtracted from somewhere but American capitalist economists ignore the depreciation of all cars purchased by consumers. They have been doing this since the concept of GNP was first developed. But planned obsolescence was not as big a factor in the economy back then. All of the statistics are nonsense for the last 60 years.

psikey

2006-4-8 02:29 AM

raymondusa (raymondusa)
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LG Kim:

Be a smarter consumer next time!  I learned long ago there are products that I use where quality and reliability is very important to me.  Another words, I will not buy an American made car, China made refrigerator, China made electronics equipments, etc.  I only owned Japanese and Germany made cars, Japanese electronics, and my shaver is a Panasonic. No nicks here, as the shaver has lasted for years.  I understand what you are saying as quality is something China will need to work on, since it should not stay in the low tech, low margin, and lower quality niche.  Give it some time. Hyundai exported some pretty bad cars at the start, but over the years, the quality improved.  I expect China to improve the quality of products, because lacking quality will limit what sectors of the economy it can effectively compete.  You may feel 2017 is fantasy for your own reasons, but we will not know for sure until 2017.  You bring up a good point about quality of products, but you have not given any other factual information to refute why 2017 is improbable from a PPP, balance sheet and income statement basis.

psikeyhackr:

Great point!  Depreciation is among other relevant financial information left out of GDP.

aquitiane:

I agree environmental issues, corruption, and other issues can impact the economy.  Main reason I wrote this is to correct misleading information (not necessarily from you) in this section.

doberman:

I will post my answer to your question in the other thread, where it belongs.

[ Last edited by raymondusa at 2006-4-7 01:49 PM ]

2006-4-8 05:46 AM

#10

raymondusa (raymondusa)
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General feedback:

Here’s another simple example to show how ludicrous some people are to use GDP as a representation of standard of living.

Calculating GDP using expenditure method:

GDP = consumption + investment + government spending + (exports − imports)

US uses borrowed money, incurring more debts and deficits, to buy military equipment.  Net result:

Deficits go up
Debts go up
Government spending goes up
GDP goes up

Expanding GDP using borrowed money, is not real growth from revenues internally, since this is not sustainable long term.  Even US cannot borrow forever, as Central Bankers around the world are justifiably alarmed at the obscene debts.  Using GDP is really false solace, since taking on more debts, is one reason US is losing leverage around the world.

Contrasting example:  China is a saver nation, consistent with the Chinese culture.  Instead of increasing consumption and government spending beyond its means, both decide it is financially prudent to save.  Net result:

Little Debts relatively speaking
Savings go way up (45% of GDP)
GDP stays lower because people are electing to save instead of consume

Summary:  If people were stupid enough to think GDP is the only measure of an economy, they can do what US does, as all sectors of the economy borrow money, with government spending beyond its revenues creating more debts and deficits, consumers spending beyond their means, driving up credit card debts, using their home mortgage like a ATM machine, business investing like there is no tomorrow, and forget savings altogether.  That will really move the GDP up.  But of course, that is only if someone is stupid enough to think the higher the GDP, the healthier the economy.

NOT!  Wake up people.

If you are going to use GDP as some litmus test for the economy, at least understand what you are talking about.  I didn’t name any poster because I’m new to this section and don’t really know some of the characters here.  My post was to correct the misinformation from some of these posters.

[ Last edited by raymondusa at 2006-4-7 03:35 PM ]

2006-4-8 05:52 AM

#11

frothow
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ramandusa

So what are you going to do with your own business in real state that made you rich in America ? move too China ? you should be ashamed of yourself for you anti-American comments . You became wealthy in America not China and yet you say China is the next economic superpower . A land in which cheap labor keeps there economy afloat . You try too be a humanitarian in your posts how about the slave labor of the workers in China?Why dont you move to China if your so confident in there economy ?Your really a communist that reaps the rewards of a capitalist .ShaME ON YOU!!

2006-4-8 07:02 AM

#12

raymondusa (raymondusa)
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frothow:

There is nothing Communistic about my post. You don’t understand the definition of the word. I’m posting information to correct the misleading information by others in this section. You are welcome to review the information I’ve shared, and tell me where you think the information is factually wrong. What is shameful is when people try to post misleading information and try to pass it off as fact.

2006-4-10 12:37 PM

#13

greendragon
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Mr. Froth...China is not really communist...

..there is an active capitalistic market.....
..with Chinese characteristics...

now the base has been completed...
now we add the complexity....

Green Dragon

2006-4-10 12:59 PM

#14

eyeofstorm (Sexy Typhoon)
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RaymondUSA the name is quite ironic from the things which he posts. Rah Rah China seems to be what is comming out of his mouth. These type of people really are self-righteous toward everything they have a notion of and are merely just a floating immigrant. I wouldn't be surprised if he jumped ship to develop in Asian countries...afterall I come from a line of real-estate developers and wealth mongers I would know a thing or two about utilizing the cheapest and lowest resources to its standard in order to gain the highest amount of profit. Frothow ...you are a true patriot and a die-hard American... I give you props for supporting to the bitter or sweet end.

2006-4-10 03:17 PM

#15

raymondusa (raymondusa)
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eyeofstorm:

Some people have a hard time with reality. They ignore reality thinking the problems will somehow go away. But I’ve learned long ago that ignoring problems have a way of making the problems grow. As I wrote to frothow, if you or others think any of the information I’ve shared is wrong, show me where you think I’m factually wrong. I’m correcting some of the misleading information in this section. Part of my success is because I’m willing to look at problems honestly, and fix the problems as soon as practical, before it gets larger. That’s the same attitude I have with the US economy, and fellow Americans should care enough to be honest and work to fix these problems. Your problem is you may not like the truth, but ignoring it isn’t going to make it better.

Lastly, there isn't anything ironic, since being an American doesn't mean being a cheerleader to bad policies, and blind to economic truth. What is ironic is when there are Americans that care so little for America, that they gladly pass on their debts and obligations to burden and weaken the next generation of Americans. If there were more Americans like me who care, and are honest about our economic state, we would not have record debts and deficits, and have fiscal and monetary policies that are responsible. Talk to yourself about irony, since you are too myopic to see it!

[ Last edited by raymondusa at 2006-4-10 12:23 PM ]

2006-4-11 01:56 AM

#16

greendragon
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Mr. RaymondUSA is an American Patriot...

...it is basic economic lesson....you cannot keep on spending!!!!!!

America is RICH..it has lots and lots of land....
It has problems....
It has GREEDY MONOPOLIST on the TOP...
who heeds to JEWISH JUDAISM philosophy...
it even put up a MONOLITH with a PYRAMID TOP.....

the MODEL MINORITY will bring SANITY back to the AMERICAN STATE!!!!
We must also help the BLACK, HISPANICS and the CELTICS.....to recover their nation from the TERRORIST MONOPOLIST!!!!!

Green Dragon....

Note: We have the same problem in Malaya....yesterday....in the "Maulud Nabi" celebration...the model RIAU man was a COMMODITY farm worker WITH 17 children...

the RIAU realized that their FACTION is now a minority in MALAYSIA and seek to bolster their numbers!!!! Pattani is the largest numbers, then comes the Natives and then the Cantonese...then the Riau....Fujienese, Indian Hindus, and Indian Moslems....Bugis and Minang.

But with greater number, the Riau will have less resources in their area of Malacca, Johor and Pahang.......which might mean a RESURGENT population growth in Patani and protectionism in Borneo and Malaya Super center!!!!

[ Last edited by greendragon at 2006-4-12 11:39 AM ]

2006-4-12 11:37 AM

#17

eyeofstorm (Sexy Typhoon)
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RaymondUSA Truth Hurts~

Here it goes, ahem your a complete sell out and too coward to ever walk the front lines of the country that has cultivated your knowledge, growth, morality, integrity oh wait nvm you lost that, and success. It's true, ignorance is bliss...but im not being ignorant I know what is going on at the moment but im not going to add gasoline to the fire on my OWN soil. Albeit, US has made its mishaps etc...however as it's your motherland it tolerates you unconditionally yet you can't repay that simple favor back?? I aint even completely caucasian yet I can say I respect my country far more than your transparent two-faced shallow-self.

Comedians usually talk excessive crap about their country 'facts or fiction' however they are joking...if they didn't love their country how the hell are they getting paid and making ends meet?

Keep self justifying ...its going to get you a Chinese passport soon!

2006-4-12 12:58 PM

#18

raymondusa (raymondusa)
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eyeofstorm:

I gave you an opportunity to factually refute anything I’ve posted, and this is best you can do?  You are a pathetic joke.  You confuse patriotism with blindly accepting what the US government does, with hypocritical foreign policies that do not gain credibility worldwide, but undermine its credibility.  USA does have very high debts, which lessen its leverage around the world.  The American people don’t save enough to self-finance.  Some people do mistakenly quote GDP like they think it is a sign of a healthy economy.  My post is correcting some of these false statements and opinions, and keeping people factually honest.

Get out of here with your “Unpatriotic Card” as that is simply pathetic.  You cannot handle the truth.  I told you to review anything I’ve written and show me where I’m factually wrong, and you couldn’t do it.  No surprise because the information I shared is factually correct.  Ignoring the truth isn’t going to fix it.  You claim it is my truth, yet it’s very telling that you cannot show anything I wrote is factually  wrong.  Whether you understand it or not, you reinforce my points.  People like you, want to counter my information, but cannot do so factually, and therefore, are only reduced to worthless opinions.  Get a clue!  Your opinion of me is irrelevant.  Try to prove my messages wrong(if you can) instead of pathetically challenging my patriotism.

You should question your own integrity, and ask yourself whether you can honestly assess USA, can honestly identify its problems, and can be a part of the solution.  I can.  I have, and I will continue to do so.  I employ many people in my company, and I’m part of the solution.

Lastly, if you don’t like the facts I share, you don’t have to read it.  You can leave, since no one is forcing you to stay here!

[ Last edited by raymondusa at 2006-4-12 09:18 AM ]

2006-4-13 12:50 AM

#19

greendragon
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Reply #20 eyeofstorm's post

Is this how you AMERICANS treats REAL AMERICAN PATRIOTS!!!!!!

America belongs to the American people...be they black, brown, celtics, asian, or whites!!!!!!!
It does not belong to monopolist hebrews, or tamany hall irish.......

wake up!

RaymondUSA is trying to save America!
We have 6 million chinese American WORRIED about the future..
We have another 6 million Sinic Asians who are similarly worried about American government recklessness in fiscal affairs....
and 120 million Hispanic and Blacks who does the low end work..
and 60 million celtic Americans sidelined by monopolist, who believe in Jewish America!

Green Dragon

2006-4-13 12:01 PM

#20

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