Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here Monday mornings.
The International Monetary Fund recently reported China could “overtake” the United States in terms of economic output by 2016.
Overtake. That’s a scary word. Sounds like we’ll be invaded. Some headline writers and talk show hosts reacted to the IMF report by predicting “The End of the Age of America.”
If China continues to grow faster than the United States, is it bad for our economy? Would you and I be worse off? No, and no. Here’s why:
1. It’s not a case of “they win, we lose.”
Economics, is not a zero-sum game. China growing wealthier doesn’t mean America will grow poorer. Quite the opposite is true. China’s rapid economic expansion the past few decades has generated huge opportunities for U.S. companies. Walk into a 200-year-old teahouse in Shanghai and you will likely find Starbucks coffee being sold under a Nike poster featuring Kobe Bryant.
2. A more productive China means bigger markets for U.S. products.
Let’s compare per capita gross domestic product, a measure of economic output per individual. China’s is about $7,500, while our per capita GDP totals about $47,000.
Let’s say China doubles its per capita output to $15,000 during the next decade. This will mean more people in China producing more products and spending more money, including some spent on goods and services from other countries. That’s a good thing for U.S. companies like Apple and Procter & Gamble, which sell some of the world’s best consumer products, such as iPads and toothpaste.
3. As China continues to grow, wages will increase and China will lose some of its “low-cost” wage advantage.
That could result in more jobs actually staying here — welcome news for U.S. workers.
So , just because its economy (with its 1.3 billion people) becomes “bigger” than ours (with our population of 310 million), it won’t mean China is “overtaking” us.
We have a very mature economy that can be expected to grow at only 3 to 4 percent over time. China is still an emerging economy that should grow at a faster pace.
Remember, the Chinese turned toward capitalism barely 30 years ago. Americans, who will remain at the center of the global economy for years to come, should be glad China decided to join the club.
Still think we should be afraid of China’s continuing economic growth?
– By Wes Moss, for Atlanta Bargain Hunter