Playing With Numbers

June 1, 2011

For centuries, China was the world’s largest economy (from tenth to fifteenth century) and if experts at the International Monetary Fund and others are correct, China will soon regain the title as the world’s largest (healthy) economy.

However, it is confusing. If we listen to The Economist in The X Factor, we are told that India’s economic growth may soon outpace China’s.

The Economist says, MORGAN STANLEY thinks it could happen in 2013; the World Bank thinks it might happen next year. Many pundits have speculated about when India’s growth might outpace China’s.

However, the International Monetary Fund’s (IMF) World Economic Outlook says that has already happened since China grew by 10.3% in 2010 and India by 10.4%.

Then from Yahoo Finance we learn the IMF says, “According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016.”

After reading the previous paragraphs, it sounds as if India will grow its economy past China and China will outgrow the United States leaving the US in third place.

In fact, India is far from growing a larger economy than China or the US.

In 2010, India’s economy ranked 10th globally or fourth depending how you stack the numbers.

India’s nominal GDP was placed tenth at $1.53 trillion, while another way of looking at the numbers says India ranked fourth at $4.06 trillion, but its public debt was $758 billion or 55.9% of GDP with $201 billion in exports and $327 billion in imports and a credit rating of $1.164 trillion.

This means India, like the US, is spending more than it earns.

China, on the other hand, had a nominal GDP of $5.88 trillion but a GDP (based on PPP) of $10.08 trillion placing it 2nd globally.  China’s public debt was 17.5% of GDP, which is a long way from India’s 55.9%.  Everything else about China leaves India far behind China’s economy.

India’s exports were more than seven times lower than China’s $1.506 trillion while its imports were almost four times lower than China’s $1.307 trillion and China has a credit rating of $8.156 trillion—much higher than India.


China is likely to resume its role as the world’s largest economy by 2015.

Any way we look at it, how can India beat China unless they are talking about the annual percent of economic growth?

Considering how much smaller India’s economy is, they would have to have a lot more growth to equal China dollar for dollar.  If India’s economy grew by 10.4% and its economy was either $1.53 trillion or $4.06 trillion (depending how one looks at it), that is still a far cry from China’s 10.3% economic growth based on a much larger GDP.

On the other hand, America, the world’s largest economy, looks like a cancer patient with six months to live.

America may have the world’s largest GDP at $14.66 trillion but having $14 trillion in public debt at 93% of GDP just about cancels that out.  Even India is doing better.

Then America’s exports were $1.280 trillion compared to $1.948 trillion for imports telling us more money is pouring out than coming in. How will America pay off its debt if losses outpace earnings?

The Economist seems to want people to think India is beating China but the numbers tell a different story. To beat China, India has to grow a much larger economy and reduce its public debt while erasing an illiteracy and poverty rate that’s embarrassing for a country touted as the world’s largest democracy.

Anyone that studies history knows that a democracy survives if the citizens are literate and understands the issues.

Discover India Falling Short

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.


The “What If” Housing Bubble in China

August 29, 2010

Charles Hugh Smith writes for the Daily Finance and claims that China’s Housing Bubble Will End Badly.

That’s not going to happen for several reasons. The first reason is that China’s economy does not depend on the housing market to survive. Most people in China still don’t own their homes even in the cities.

In the US, housing loans to GDP were 79% but in China, that number is about 15%, which means real estate in China doesn’t prop up the economy.

Let’s look at one fictional individual who loses his job in China and can’t make his mortgage payment.

If he always lived in the city and has family (even distant relations), he will move in with them and rent his home to make the payments. The family may even pitch in so he doesn’t lose the home.

If that fictional Chinese man came to the city to work from a village, he returns home.  The peasants in rural China don’t have to worry about losing those homes.  In fact, it’s as if China had two economies: rural and urban.

If the government needs to develop the land the peasant’s home sits on, a new home is provided. More than seven hundred million Chinese live in villages owned by collectives and the central government. Those peasants don’t have a mortgage payment, pay rent or property tax.

Even in urban China, people only pay property tax once when they buy the home they live in.  Property tax for your home isn’t an annual burden as in the US.

Another factor is that the average savings rate in China is 40% and the wealthiest Chinese own about 40% of urban real estate.

See Betting Against China’s Housing Market

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.


Investing BIG in Education

April 21, 2010

China is making HUGE investments in education. In 1998, then-President Jiang Zemin called for a massive increase in enrollment in higher education. Since then, high school and college enrollments in China grew. Source: FP-Foreign Policy, April 14, 2010

Tsinghua University's east gate

In China, more than thirty percent graduate with degrees in engineering or technology. In the United States, only five percent of university students graduate in these fields, while U.S. universities produce more psychologists.

That is why President Obama has encouraged American students to study science. Source: White House

What’s going to happen if American students do not start working hard to become engineers and scientists?

Tsinghua University

In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000.  It’s a fact that people with an education in engineering and science earn more and are more productive.  China and India combined are turning out more than 600,000 engineers a year—ten times that of the United States. Source: Rocketry Planet

To see the results of this push in education, discover Adding to Honor in One Lunar Leap

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.