China Overtakes U.S. Economy
To say this is a complicated issue would be understating the facts. In truth, I doubt the best economic minds, the most brilliant "think tanks," have any real idea where things will go from here, for China and for America.
But before we attempt to review where we stand, let's consider how we got here by watching the video below.
On the one hand, there are the interests of the World Trade Organization, the United Nations, and International Corporation's in seeing China's increased development. It is the most populated nation in the world, but it had the worst "poverty" levels of any nation in the world about 30 years ago.
Now "poverty" is a relative term, the majority of the population at that time were living in huts, farming rice or other staples, living very simply without electricity or much direct oversight, etc. Fast forward 30 years and the majority of the population has been "lifted" out of poverty, into the "civilized" world. Which in China today consists of the most polluted air, water, and food on earth. They have traded in the simple rural farming existence for electricity, cities, and the ability to buy stuff, like antibiotics for their kids who are suffering from exposure to bacteria and chemical toxins in their water.
According to the World Economic Forum, 800 million Chinese have been lifted out of poverty, and into something better:
That may be well and good for China, but it has come at a cost, and that cost is America's industrial base, its self sufficiency, and self sustainability.
Want a new refrigerator? You will have a hard time finding one made in America. America's ability to build a vehicle from scratch, without components from China, Mexico, or Japan? Not likely.
It is telling, that for the first time in decades, the U.S. is no longer the world's largest economy, China has become number one, according to the International Monetary Fund.
China will produce $17.6 trillion in terms of goods and services compared with $17.4 trillion for the U.S.. Just 14 years ago, the U.S. produced nearly three times as much as the Chinese, Dow Jones’ MarketWatch reported.
Another measure of an economy’s strength is its “purchasing power parity” or PPP, which is the rate the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.
China now accounts for 16.5% of the global economy when measured in real PPP terms, compared with 16.3% for the U.S.
Though the average Chinese citizen earns a lot less than the average American, simply converting a Chinese salary into dollars underestimates how much purchasing power that person, and therefore that country, might have. For instance, the cost of the same shirt costs less in China than it does in America.
So the IMF measures both GDP in market-exchange terms, and PPP terms. On the purchasing-power basis, China is overtaking the U.S. right now and becoming the world's biggest economy.
If you look beyond this, to recent trade trends occurring, even now China is surpassing America in critical areas on almost a daily basis. For instance China recently overtook the US and France as Germany’s biggest trading partner.
German imports from, and exports to, China rose to €170 billion last year, Federal Statistics Office figures reviewed by Reuters showed.
This was sought by the German government, which has made it a goal to safeguard global ‘free’ trade after President Trump threatened to impose tariffs on imports. It is an alliance of sorts, China and Germany will support one another, should Trump’s effort to undermine their ability to continue to drain America of wealth and resources succeed.
In fact, German Vice Chancellor Sigmar Gabriel has recently suggested that the EU should refocus its economic policy toward China, should the Trump administration pursue bringing balance back to trade, so that nations like China and Germany cannot continue to have an advantage over American made products, IN AMERICA.
“Given the protectionist plans of the new US President one would expect that the trade ties between Germany and China will be further strengthened,” Germany’s BGA trade association said in response to the shift.
Lets really consider the incredible situation we are dealing with here, the EU expects America to throw away its wealth, resources, and lives protecting them from the Russian threat (via NATO deployments, we currently have thousands of American soldiers, tanks, artillery, all along Russia's borders, in Germany, Poland, etc.) and yet they expect America to continue to let them manipulate their currency so they can take advantage of ‘free’ trade allowing them to sell their exports at lower cost than American-Made can easily compete with.
America carries the brunt of costs for NATO, supplies the bulk of forces for NATO, all the while the EU is antagonizing Russia, NATO is trying to manipulate all former soviet bloc states into joining (which we long ago promised Russia we would not do) and now, while nearing a new Cold War status with Russia, Germany's leadership is determined to penalize America because it wants fair trade arrangements for its own country!
The audacity of America... to try and put itself, and its citizens, ahead of other nations. tsk.tsk.
Just over a year ago, in 2015, the US became the top trading partner for Germany, overtaking France for the first time since 1961 thanks to an upturn in the US economy and a weaker euro. And now, Germany can't distance itself fast enough from America, to become China's best buddy.
Looking at exports alone, the US remained the biggest client for products ‘Made in Germany’ in 2016, importing goods from Europe’s biggest economy worth some €107 billion. The same goes for China, we are importing goods and services from China at the rate of more than $500 billion a year, whereas our exports are just over $100 billion a year, we import more than any other nation from China. Maybe its time we stop importing, and start Making In America again... putting our people to work, and rebuilding our industrial might.
It's not just trade that China is beginning to dominate, even with our closest allies. China is investing its wealth everywhere in the world. While America is busy spending its trillions fighting nations across the globe, and being 'bodyguards' for the EU, Saudi Arabia, and others... China is free from such burdens and is buying goodwill, and resources.
China continued to strengthen its links with the Islamic Republic even while the Obama Administration was trying to impose sanctions on Iran to get them to curb their Nuclear ambitions.
Iran’s oil, which generates almost eighty percent of Iran's government revenues, is increasingly flowing towards refineries in China, which is now its biggest trading partner. In return, Iran has become a lucrative market for Chinese products and services. And China has invested billions of dollars to improve Tehran’s infrastructure.
Close to 20 percent of China's oil imports now come from Iran. And an increasingly larger amount of their natural gas imports come from Iran as well. China finds in Iran a permanent partner for its exports and a source for its growing energy demand.
In 2004 and 2005 China signed series of 25 year contracts worth over $150 billion, for over 400 million tons of liquid natural gas. In 2011, Beijing and Tehran signed yet another extensive deal that gives China exclusive rights to several Iranian oil and natural gas fields through 2024.
Under the terms of the deal, Iran gave Chinese oil companies exclusive rights to three large regions of Iranian land as well as the rights to build all necessary infrastructure for these regions of large oil and natural gas fields. In return, China promised to treat any foreign attack against these regions as attacks against its own sovereign territory, and to defend them as such.
China was given permission from the Iranian government to maintain and increase its military presence in Iran. Years ago China's General Zhang Zhaozhong's stated that "China will not hesitate to protect Iran even with a third World War." This of course is the primary reason why, despite Iran's ongoing interference in Iraq, and the threat of Iran gaining Nuclear weapons, America has never taken any military action against the Islamic Republic.
China is responsible for aiding Iran in the development of advanced conventional weapons including surface-to-air missiles, combat aircraft, radar systems, and fast-attack missile vessels. And of course any Nuclear abilities the Iranians have developed could not have been achieved without China's aid. With China's support Iran's security and power in the Middle East is all but assured.
Just this past January, China and Iran mapped out a wide-ranging 25-year plan to broaden relations and expand trade. President Xi Jinping met with his Iranian counterpart Hassan Rouhani, the official Islamic Republic News Agency reported. The visit was the first by a Chinese president in 14 years.
"Today we discussed the strategic relationship between both countries, setting up a comprehensive 25-year plan and also promoting bilateral relations of up to $600 billion over the next 10 years," Rouhani said.
China continues to strengthen its trade ties with Germany, Iran, New Zealand, all across the globe really, and is on pace to surpass America everywhere, on every level.
China's growth has outpaced American growth by a huge margin over the past 30 years. Between 1980 and 2010, U.S. GDP increased roughly 5 times. China’s GDP increased approximately 30 times over the same time period. And from 2010 to 2015 they continued on pace while our GDP barely remained in the positive. If we continue on the current rates of growth the two nations have been on the past 5 years, if we were to continue to allow them to manipulate currency, and remain tariff free, America will be more and more beholden to the will and wants of China, and other nations, and we will no longer be in control of our own destiny, or economy.
The One Belt One Road Initiative
Launched in 2013 as “one belt, one road”, it involves China underwriting billions of dollars of infrastructure investment in countries along the old Silk Road linking Asia, Europe and Africa along five routes. The Silk Road Economic Belt focusses on: (1) linking China to Europe through Central Asia and Russia; (2) connecting China with the Middle East through Central Asia; and (3) bringing together China and Southeast Asia, South Asia and the Indian Ocean.
The 21st Century Maritime Silk Road, meanwhile, focusses on using Chinese coastal ports to: (4) link China with Europe through the South China Sea and Indian Ocean; and (5) connect China with the South Pacific Ocean through the South China Sea. Europe. The ambition is immense. China is spending roughly $150 billion a year in the 68 countries that have agreed to the plan.
The first major noteworthy item is that these trade routes running across continents does one major thing. It bypasses America's navy, it bypasses America's dominance of the ocean trade routes, making them unnecessary for China to have access to.
In time, it will bring these nations closer to China, as interaction with and dependency on China's economic might grows.
BRICS what it is, why its important
BRICS is an association of the five fastest emerging nations of the world, Brazil, Russia, India, China and South Africa.
BRICS consists of 43% of the World Population, 30% of the world GDP (and climbing), its goals are economic co-operation and self-sufficiency rather than dependency on the West dominated institutions. In short, they want to free themselves from their Dollar-dependency.
China is the leading nation of BRICS, setting the tone for its direction.
The Asian Infrastructure Investment Bank (AIIB)
One step closer to making the World Bank, IMF, and American dollar obsolete.
AIIB offers sovereign and non-sovereign financing for sound and sustainable projects in energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, and urban development and logistics.
As of December 2015, all of the 57 Prospective Founding Members of AIIB had signed the Articles of Agreement. The initial signatories were Australia, Austria, Azerbaijan, Bangladesh, Brazil, Brunei Darussalam, Cambodia, China, Denmark, Egypt, Finland, France, Georgia, Germany, Iceland, India, Indonesia, Iran, Israel, Italy, Jordan, Kazakhstan, Republic of Korea, Kyrgyz Republic, Kuwait, Lao PDR, Luxembourg, Malaysia, Maldives, Malta, Mongolia, Myanmar, Nepal, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, Uzbekistan, and Vietnam.
On 16 January 2016, the Board of Governors held its inaugural meeting, declaring the Bank open for business and electing Mr. Jin Liqun as President for an initial five-year term.
As of 17 June 2017, AIIB had 80 approved members/prospective members in total.
Questions & Answers
© 2017 Ken Burgess