China's GDP in 2001 was $1.159 trillion - a mere 28% of Japan's $4.141 trillion. (Let's ignore purchasing power parity for the moment.) After two decades of China growing at 7% per year and Japan at 2% per year, China's nominal GDP will still be a mere $4.486 trillion, versus Japan's $6.153 trillion, in 2021. By contrast the US will be $20 trillion (at 3.5% a year), which is almost twice as big as Japan and China combined. Although China will still be the fourth largest economy in the world, after the EU, US and Japan (and EU must be counted as a unit by then), China will clearly still be a small fry - less than a quarter the size of America's economy!
In the meantime, however, it seems inconceivable that the Chinese currency will still be pegged to the dollar at 8.28 yuan. Most likely China's currency will rise gradually as the central government slowly loosens its grip on the trading band over the next 17 years. Should China's yuan be worth twice its present value by 2021, China's GDP, $4.486 trillion in 2001 dollars, should double to almost $9 trillion. While $9 trillion is still small compared to America's $20 trillion and EU's even larger economy, it is no chump change. To say therefore that China will still not be an economic powerhouse by 2200 - 79 years after 2021 - is a prognostication unworthy of a C+ student at Thurow's own MIT management school. After all, in 2003 Japan's economy is only 44% as big as America's, and though it's struggling to grow, it is nothing to sneeze at. China could grow to 45% America's size in less than two decades.
In short, my calculations show that in 2021 America could be worth $20 trillion, China as much as $9 trillion, and Japan over $6 trillion. The EU may end up bigger than America - or may not. (EU's path to grow lies more in bigger membership than in economic growth.) That means China will likely be the second or third largest economy in the world less than two decades from now, measured in nominal GDP at 2001 dollars.
For those of you who are surprised by this, consider that in 2005 China will surpass the UK in nominal GDP to be the fourth largest economy in the world after the US, Japan, and Germany. Jumping from 4th place to 3rd place from 2005 to 2021 (16 years!) is not exactly my idea of a spectacular improvement. (Some Africa states can leap - or in some cases tumble down - by ten places in a single year! There are 180 some countries, remember.) Can a CEO boast that his company's sales or market value miraculously went up by one Fortune 500 rank in 16 years?
The vagaries of currency rates mean that the PPP remains the single best, if unperfect, measure of comparing economies' sizes. The best forecasts show that China's economy will be worth $20 trillion in 2020 or 2021 - exactly equal to America's - given 7% growth for China and 3.5% for America. By THIS measure China could be the largest economy in the world in our lifetime.
In either case, China will be huge - like a hot air balloon blowing up before our eyes.
How big China will get by 2100 is anyone's guesses. I won't hazard an estimate if only because anything can happen 96 years from now. Thurow should not have gone into this fortune-telling business. Leave that to other "professionals."
I cannot believe a distinguished economist like Thurow could have made such an elementary error. British astronomer Martin Rees diffidently puts his money on the Big Bang Theory at "only" 98% chances of being correct, adding, "Astronomers are often in error but never in doubt." In fairness to Sir Martin, the record of economists is far worse. Mr. Thurow is over-confindent in his views, as this book shows.
All that Mr. Thurow can come up with on China in this book is misinformed preconceived notions and incorrect raw data, mixed together with some vague generalizations and essentially amateurish gibberish unbecoming a tenured professor at the august MIT.
In the International Energy Outlook 2003 published by the Energy Information Administration of the US Department of Energy, China's GDP is projected to be $5,085 billion in 2025 - the third largest in the world after the US and Japan, and considerably larger than Germany's $3,811 billion, France ($2,781 billion), Britain ($2,528 billion), or India ($1,775 billio). And these figures are in nominal GDP in constant 1997 dollars and assume the exchange rates to be unchanged.
Will the world's third largest economy not be considered an economic powerhouse except perhaps in the "distant" future, as Thurow asserts? To put it in perspective, Germany is the world's third largest economy today, and yet its nominal GDP is only 25% America's (about $2.5 trillion). Few people would dispute that Germany is an economic powerhouse, small as it is.
To be sure, America will still be much bigger than everyone else (except for the EU): $19,285 billion. Japan in 2025 will only be worth $6,680 billion - a bit bigger than China and still far behind the US. (Japan will be one third the size of America, but then Japan's population will likely be only one third as large as America's - or less.)
China's $5 trillion will be just over one-quarter America's GDP. But this assumes China's renminbi to remain the same and not to rise - an unlikely prospect. Also, in purchasing power parity, China's $5 trillion can easily balloon to $20 trillion (based on today's PPP calculations) in 2025, thus making China's real gross GDP to be slightly larger than America's by the end of the first quarter-century of the 21st century.
How Thurow can claim that China will not matter economically from now to the end of this century is beyond me. It is absurd. To repeat, by 2025 China will have the third largest economy in the world in GDP based on exchange rates, and the largest economy in the world in GDP based on PPP. In 2025! Now, if this is "distant future," wait till you see China's share of world GDP continues to grow after 2025, even at a lowering rate. It is almost certain that China will take the lead from the US both in nominal GDP and in PPP before this century is out, if not in per capita income.
Thurow argues that only the per capita income counts. I have trouble accepting this. If you're the biggest guy on the block, you start making the rules, even if you don't wear fancy clothes like the smaller guys. In the real world, absolute size matters as much as per capita income; otherwise Luxembourg instead of the US should be considered the superpower.
Books written by Professor Gregory Chow of Princeton and Professor Angus Maddison of the OECD draw the same conclusion about China's future PPP figures. The US Department of Energy and Professor Richard Cooper of Harvard base their projections on nominal GDP. All four predicts China's growth rate to be twice that of the US for the next two decades. The first two decide that China's PPP will equal America's by 2020. The latter two decide that China's nominal GDP will be the world's THIRD largest by 2020 (not 2025), as long as components of the EU are counted as separate economies. (Otherwise the EU will be #1, America #2, Japan #3, China #4, Brazil/India #5, etc. in nominal GDP, and the EU will be #1, China #2, America #3, Japan #4, etc. etc. in PPP.)
In each case, the implication is the same: China is going to be a BIG deal soon enough for most of us if not for Thurow. This is what Margaret Thatcher means when she writes that China is "undoubtedly on course to become an economic superpower" ("Statecraft"). This is what Paul Wolfowitz meant when he told the Washington Times that China is going to become a superpower in the next quarter-century to half-century, adding "and that's pretty fast by historical standards." This is what Jack Welch of GE means when he writes that China is going to wield enormous influence in this century, and warns managers "doing pie charts" to "leave half the pie open for the Chinese" ("Jack: Straight from the Gut"). And this is also what Lee Kuan Yew of Singapore, Ora Namir (former Israeli Minister of Labor), and Jeffrey Garten, Dean of Yale School of Management, mean when they proclaim today's China to be "the second most important country in the world." (Various news sources)