Since 1871, the United States has been
ranked as the world’s largest economy. However, China, appears to take over as
the world’s largest economy according to the IMF and the World Bank based upon Purchasing
Power Parity (PPP) of GDP indicator. Statistics show that China’s GDP will
overtake the U.S level by 2028. Just China and the United States alone, make up
about 40% of the world’s economy. But, as China continues to grow, it will make
up for a larger share of the global economy. The Chinese economy is now worth
$17.6tn, a bit higher than what the U.S is worth, $17.4tn. This is the first
time the U.S has been knocked off first place since the 1870’s. It won’t be too
long until China’s economy surpasses the U.S by other measures too, leaving
China to be ranked as number one in everything.

As many may know, China has been ruled by
a communist government for years which is one of the main factors as to why it
shares differences with the U.S, known as a Constitutional Federal Republic. Over
the years, leaders of China have aimed into creating a communist economic
system but have failed as they realized much of it’s growth occurred after it incorporated
some capitalist practices. So today they use a “socialist market economy” system
to describe their economy. Since then, China’s growth rates have increased to
10% each year for over 30 years. Despite China’s population which is now 1.4
billion, four times higher than the U.S, the economic increase has gotten rid
of China’s poverty. Just in the first three quarters of 2017, China’s GDP
reported a growth of 6.9% and by the end of the year it’s estimated to reach
6.9%. With China’s new five-year plan from 2016-2020, it targets to improves social
and economic efficiency, doubling GDP by 2020.

From 2013 to 2015, China was the world’s
largest exporter. Two trillion dollars of its production was exported in the
year of 2016. The U.S trade deficit with China was also $347 billion that year.
Only reason the trade deficit still occurs is because the U.S exports to China
were only $116 billion while imports from China were $463 billion. Since China
is known for producing consumer goods for an extremely low cost, America has
kept ties with them in that manner. Most economists have come to the conclusion
that China has been able to keep these prices due to two factors: a low
standard of living, which allows a lower pay to workers and an exchanged rate
that is partially fixed to the dollar. With that being said, American companies
can’t compete with the low costs China has to offer because America has to pay
at least the minimum wage by law. It’s very unlikely that the trade deficit
between China and the U.S would change because just for a “Made in America”
product we would have to pay extremely high prices.

The growth of the trade deficit between
China and U.S explains why many people are without jobs. The U.S is both
loosing jobs in manufacturing and opportunities in being able to create more. Between
2001 and 2015, 3.4 million jobs were lost and incomes were reduced. Each $1
billion in exports to another country from the U.S helps American jobs, while
each $1 billion in imports from another country results in a job loss. Since
the WTO (World Trade Organization), the trade deficit in China is now costing
employees jobs in the U.S. From 2001 to 2015, 3,443,300 U.S jobs were
eliminated or displaced since the increase between the U.S and China trade
deficit. The growing trade deficit clearly has reduced employment in the U.S
but with China being our current largest goods trading partners, changes shouldn’t
be expected no time soon.

Chinese inflation has been growing a lot faster
than the U.S inflation since 1999. “Due to the cumulative effect, the World
Bank retroactively cut the size of its 2005 PPP estimate of China’s GDP by more
than 40%.” Right away the Chinese economy decreased by 40%, which means if this
didn’t happen the Chinese GDP would be relatively similar to the American GDP.
Since 2005, Chinese inflation actually increased and has been faster than the American
inflation. To evenly compete with China, the U.S should cut federal deficit and
ensure a well educated and growing labor force. In my opinion, I think the U.S feels
like they’re on edge with China catching up economy wise but I don’t think
china will ever fully be number one due to their poor population and communist
country.