China has the largest economy
IMF: China is the biggest economic power
Has China's economy overtaken the US and is the new number one in the world? Yes and no. Adjusted for purchasing power, the International Monetary Fund (IMF) sees the Chinese economy ahead of the US for the first time this year. That is, when comparing what a Chinese and an American have to spend on a cup of tea or coffee. In other words, what he can actually buy with his money - regardless of the different price levels and exchange rates. But if everything is calculated in US dollars, the US is a whopping 70 percent ahead of China and remains the world's largest economy.
Calculated per capita, the economic output of the USA is even four times higher at 53,001 US dollars. It is precisely because of this that many experts - especially in the USA - dismiss the IMF calculations as "not so important", while many Chinese are proud to have overtaken the superpower USA on this point at least. The fact remains that China is growing. Despite the weaker economy with seven percent, while the USA can only expect two percent. That is why everyone is looking to China, which, according to the monetary fund's purchasing power-adjusted calculation, now has a share of 16.5 percent in the global economy - compared to 16.3 percent in the USA. The Middle Kingdom is therefore more important than ever for the global economy, which has still not recovered from the financial crisis.
China is growing less dynamically
But China is no longer growing quite as quickly either. The times of double-digit growth rates are over. Today, state and party leader Xi Jinping speaks of the "new normal". This year the economy should only grow by 7.3 or 7.4 percent, slower than it has been since the 1990s. That is at the lower end of the original target of "around 7.5 percent" for 2014. Only seven percent could be specified for the new year.
What does "new normal" mean? It means a shift from rapid growth to medium, rapid growth that is more focused on quality than quantity. Instead of expanding production, it should be improved. Instead of waste, it is more about efficiency today. Conventional growth engines are to be replaced by new driving forces for the economy.
At the annual economic conference at the beginning of the month, the plans for the new year were set: The "prudent" monetary policy should "concentrate more on finding an appropriate balance between tight and loose". The budget policy should be "pro-active", the transformation of the economy should be promoted. What does that mean? Experts anticipate an easing of monetary policy, a slightly expansionary budget and a higher deficit. The fight against bubbles such as in the real estate sector is likely to be intensified and the shadow banks to be further contained. Reforms are most likely to be expected in the financial sector, less so in the state sector.
From producer to investor
However, mergers in the rail and aviation industries are to be promoted in order to make the state-owned companies more efficient, as a Chinese source familiar with the plans told the German press agency in Beijing. "Foreign corporations like Siemens and Airbus have no idea what to expect here." China wants to transform itself from the "factory of the world" into an investor and player in other markets abroad.
The "new normal" also includes risks for China's economy: "The downward pressure remains quite high," warned the planners at their conference. Global demand is weak. Export is no longer growing as fast. The real estate market in China, which has been overheated to date, is stagnating and harbors risks. Mountains of bad loans could trigger a banking crisis in China as well. Experts believe that growth could soon drop to six to seven percent. The possibility of a "hard landing" at less than six percent is generally considered unlikely, but it is less and less excluded by renowned economists. The consequences went beyond China's borders. Such a downturn would drag the world economy down further and would be felt in the USA as well as in export-dependent Germany.
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