It’s official: America is now No. 2
.
Hang on to your hats, America.
And throw away that big, fat styrofoam finger while you’re about it.

There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.

It just happened — and almost nobody noticed.

The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.

As recently as 2000, we produced nearly three times as much as the Chinese.

To put the numbers slightly differently, China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S.

This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.

I first reported on this looming development over two years ago, but the moment came sooner than I or anyone else had predicted. China’s recent decision to bring gross domestic product calculations in line with international standards has revealed activity that had previously gone uncounted.

These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders.

PPP is the real way of comparing economies. It is one reported by the IMF and was, for example, the one used by McKinsey & Co. consultants back in the 1990s when they undertook a study of economic productivity on behalf of the British government.

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Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. But such measures, although they are widely followed, are largely meaningless. Does the U.S. economy really shrink if the dollar falls 10% on international currency markets? Does the recent plunge in the yen mean the Japanese economy is vanishing before our eyes?

Back in 2012, when I first reported on these figures, the IMF tried to challenge the importance of PPP. I was not surprised. It is not in anyone’s interest at the IMF that people in the Western world start focusing too much on the sheer extent of China’s power. But the PPP data come from the IMF, not from me. And it is noteworthy that when the IMF’s official World Economic Outlook compares countries by their share of world output, it does so using PPP.

Yes, all statistics are open to various quibbles. It is perfectly possible China’s latest numbers overstate output — or understate them. That may also be true of U.S. GDP figures. But the IMF data are the best we have.

Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power.

And it was a similar story with previous hegemonic powers such as France and Spain.

This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.

Brett Arends is a MarketWatch columnist. Follow him on Twitter @BrettArends.
http://finance.yahoo.com/news/official-america-now-no-2-150936444.html

Dats gud to hear

Are you now saying WE Nigerians can now Trust and Buy Chinese goods any day any time? If yes; Let US start with Chinese Phones.

Napoleon called China the sleeping giant.


Could it be the reason why US is beefing Nigeria.

I never understood buss studies, can someone summarize

But a lot of the industries in china were own by the americans brithons germans japan and south koreans due to cheap labour and cheap infrastructures. Assuming these country decide to move away from china where do you think china will be.
Eg the android software been own and controled by google of america

Nice one by the chinese.
Make america know say no be only dem dey.
If only our politicians would change their ways....

2cato:
But a lot of the industries in china were own by the americans brithons germans japan and south koreans due to cheap labour and cheap infrastructures. Assuming these country decide to move away from china where do you think china will be.
Eg the android software been own and controled by google of america

If its you, will you move your business away.

2cato:
But a lot of the industries in china were own by the americans brithons germans japan and south koreans due to cheap labour and cheap infrastructures. Assuming these country decide to move away from china where do you think china will be.
Eg the android software been own and controled by google of america

Businesses are beholden to the shareholders not to the country of origin.And shareholders care much more about their investments aka profits than where the products are made.

BlackTechnology:



If its you, will you move your business away.

NO

2cato:
NO

Thank you for being honest.

agohmamuda:
Are you now saying WE Nigerians can now Trust and Buy Chinese goods any day any time? If yes; Let US start with Chinese Phones.

You know there are chinese phones as expensive as some top samsung and iphone phones. Buy those ones not the #15000 phones.

2cato:
But a lot of the industries in china were own by the americans brithons germans japan and south koreans due to cheap labour and cheap infrastructures. Assuming these country decide to move away from china where do you think china will be.
Eg the android software been own and controled by google of america

They are there because the chinese govt policies are favorable to them. The chinese govt knows the importance of their presence there to their economy. Lots of cash in flow with little going out.

eph12:

They are there because the chinese govt policies are favorable to them. The chinese govt knows the importance of their presence there to their economy. Lots of cash in flow with little going out.

Gbam

Hopefully,Nigeria can learn one or two things from the Chinese development model,and see how far we can go. If we can develop our manufacturing sector,we'd be on the right track. I think we should focus more on agriculture and manufacturing. These two alone,can give our economy that major lift.

@ Ops, do you have a faint idea of Macro Economics. I guess nay. National economics is not measured based on PPP but on real GDP (monetary value of goods produced and earn in a year) . And for ur info, the value of US economy is almost double that of China as at date. Yes, almost double. What PPP is saying is that assuming the goods are produced and sold under same price regime nd condition, what will the comparison be across the world. I believer I don't need to tell u that workers in the US and PRC earn different wages, are subjected to different conditions. Also the exchange value of the USD is far greater than the Chinese currency. In reality, it will take the next 50yrs for Chinese economy to be worth the US economy as at today if the US economy stagnate while China grow @ 6.3%. As at Q3 2014 the Chinese growth was sub 3%. Regards

pix of china being number1 or ah dont believe it!

I expected it, but not so soon. Kudos to our chinko bothers.

China has a BILLION MORE people than the US. It's about time they made those numbers count.

hayokunleoni:
@ Ops, do you have a faint idea of Macro Economics. I guess nay. National economics is not measured based on PPP but on real GDP (monetary value of goods produced and earn in a year) . And for ur info, the value of US economy is almost double that of China as at date. Yes, almost double. What PPP is saying is that assuming the goods are produced and sold under same price regime nd condition, what will the comparison be across the world. I believer I don't need to tell u that workers in the US and PRC earn different wages, are subjected to different conditions. Also the exchange value of the USD is far greater than the Chinese currency. In reality, it will take the next 50yrs for Chinese economy to be worth the US economy as at today if the US economy stagnate while China grow @ 6.3%. As at Q3 2014 the Chinese growth was sub 3%. Regards

.

Sir go back and reread the article again

chronique:
Hopefully,Nigeria can learn one or two things from the Chinese development model,and see how far we can go. If we can develop our manufacturing sector,we'd be on the right track. I think we should focus more on agriculture and manufacturing. These two alone,can give our economy that major lift.

and Mismanagement, Corruption n Indiscipline

eph12:

You know there are chinese phones as expensive as some top samsung and iphone phones. Buy those ones not the #15000 phones.

I swear I don't know, pls give me their Brand names.

hmm...

BlackTechnology:
Napoleon called China the sleeping giant.


Could it be the reason why US is beefing Nigeria.

yes nigeria is a potential world power...so stop clamouring for nigeria to collaspe,inorder to gain biafra

agohmamuda:


I swear I don't know, pls give me their Brand names.

K

We Nigerian students are celebrating it here in France

Wow.. unbelievably true.

They have started telling lies again.

asaridokuboyansh:
yes nigeria is a potential world power...so stop clamouring for nigeria to collaspe,inorder to gain biafra

Biafra is a greater giant

Do you know why


Because in Biafra, Yoruba Hausa Fulani envy hate and jealousy won't hinder Igbo ingenuity.

2cato:
But a lot of the industries in china were own by the americans brithons south infrastructures. Assuming these country decide to move away from china where do you think china will be.
Eg the android software been own and controled by google of america

Wrong bro, Americans and Britons own few industries there majorities are in Taiwan...the Chinese run their thing and I am happy Nigeria is learning from them. The Chinese used the Americans thru imitations..

It was expected. The US themselves knew it was just a matter of time before China overtake them. China has arrived. Economic power and political power = world no.1
Nigeria gotta move closer to China, Brasil, India and South Korea for greater economic cooperation.

hayokunleoni:
@ Ops, do you have a faint idea of Macro Economics. I guess nay. National economics is not measured based on PPP but on real GDP (monetary value of goods produced and earn in a year) . And for ur info, the value of US economy is almost double that of China as at date. Yes, almost double. What PPP is saying is that assuming the goods are produced and sold under same price regime nd condition, what will the comparison be across the world. I believer I don't need to tell u that workers in the US and PRC earn different wages, are subjected to different conditions. Also the exchange value of the USD is far greater than the Chinese currency. In reality, it will take the next 50yrs for Chinese economy to be worth the US economy as at today if the US economy stagnate while China grow @ 6.3%. As at Q3 2014 the Chinese growth was sub 3%. Regards

50 years? That's completely wrong. China is scheduled to be declared officially as world's number one economic power by the year 2020.