IMF 2016-The Year That China Overtakes US

1. The Shocking IMF AnnouncementThe title of this book was captured from the IMF Report of April 2011, which sent shudders throughout the world when it came out. In its statement, the IMF had predicted that America would lose its leading edge to China by the end of 2016 when measured in GDP. Whereas most analysts had been expecting that to happen, the earliest date that many had given was 2027. The speed of change caught most people by surprise. The IMF had used what is referred to as purchasing power parity (PPP), predicting that by the end of 2016, China’s output will be $19.0T compared to that of the US of $18.8T. But what does that mean when China’s population will still be nearly four times that of the US? In fact, this figure may mean jolly little because if you are talking about the quality of life measured against per capita income, China will be registering a quarter of that of the US. This change is more psychological than a reality. However, it may have some monetary and fiscal implications as people change their attitude towards the dollar. But this is a process rather than an event. Over time, the dollar will lose its value as the leading global currency -as it is already doing bit by bit. Consequently, Americans will continue to lose their economic advantage that simply comes from the position of the dollar as the world’s leading currency. In terms of military might, science and technology, some experts have put China behind the US by another 40 years. In those areas, America is expected to remain the undisputed leader.This overtaking will only happen if China can prevail over the challenges that come as a package with the economic development. These challenges include a demand on political reforms, fair income distribution, cultural changes, claim to better environment, quality products, condition at work and democracy. In the long term, communism will not survive the onslaught of free market; it has already taken hold on China. Its demands are many and its kicks are hard and varied and can only grow. China must factor that in or it will be caught flat-footed. 2. The World Financial CrisisThis narrative tries to explain the World Financial Crisis, which appears to have been going on forever. In the face of pain, five years can be a long time. Where Europe is suffering and profusely bleeding, the US is experiencing a dull ache, which has resisted painkillers. Unemployment across Europe is way too high while in the US, it is modest but still above what one would expect. To most people in hard-hit areas of Europe, especially Greece, Portugal, Spain, Ireland and Italy, people have endured immense sacrifices and the end is not yet in sight. Using a combination of satire and facts, the volume turned out to be a highly informative piece. It is a brilliant narrative told in a unique but attractive prose for anyone with an interest on ‘what’s up?’ in the field of economics. 3. General OutlineThere are sections of it that dwell on the relationship between China and America at length, realizing the importance of their economic bonds. It is called celebrity gossip, you know! The author has given the background information and explained the rise of China as part of a global political-economic change. But the change is more of a modification than a transformation. This adjustment requires integration as opposed to isolation and pointless competition. China has thrown the wide straw hat away and left the rice paddies in favor of the western way of life and suit. This change will not render the western countries and the US irrelevant. To the contrary, the western culture will become more enduring and far-reaching in its effects. A thousand and half years after Rome closed its garrisons in the Western Europe and we are still in awe of its ways! We still speak Latin and address people from the Forum! We even wear a fashion of a toga on our college graduation day to say that we are learned Romans! Read more...