China's Economy Will Overtake America's Within a Decade. Discuss Your View, Giving a Clear Yes or No to the Statement in Your Response

Topics: Economics, Macroeconomics, Unemployment Pages: 1 (424 words) Published: December 8, 2012
Over the recent years, China’s economic growth has been improving significantly -characterized by the exponential growth in the GDP (in nominal dollars) which is expected to exceed that of America by 2018. According to the However, I believe that it is unlikely for America to be overtaken. This essay will put forth the reasons to which China is unlikely to succeed. First of all, I believe that the notion of the natural behavior of the economy (the economic cycle) supports my statement strongly because of the juxtaposition of the states at which the two countries are in. Now, America is in recession and is emerging into the expansion period. This means the economy is starting to improve and move towards the Boom state whereas, China’s economy (now experiencing a boom) may continue to grow at a slower rate as it moves towards the contraction era. Therefore, it is likely that in 10 years the situation will be reversed with the expectations that China’s nominal GDP will start to decrease while America’s will start to increase. As Bo Bonnett once said, “as sure as the spring will follow the winter, prosperity and economic growth will follow recession.” More to this, with reference to the influences in aggregate expenditure in the economy, the increasing GDP may result in the rise in marginal propensity to save which will decrease the level of aggregate consumption and hence the money GDP. As a result it is possible to argue that a paradox of thrift may occur as the Chinese will want to save more as they earn more, not knowing their actions will reduce their GDP and ability to save in the future. Furthermore, China’s dependency on exports is unsustainable in the long run: heavy reliance on the country’s exports and investment is unhealthy. This is because in the long run, the factors of inputs are variable. In conclusion, I believe that China’s economy will not exceed America’s due to the nature of the economic cycle, the effect of paradox of thrift and the...
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