China overtakes US as largest economy

According to a recent study conducted by the International Monetary Fund (IMF), China's economy has overtaken the United States (US) to become the World’s largest economy.

The IMF study measured the Gross Domestic Product (GDP) in market exchange terms in measure of purchasing power (cost of living data). It is through a purchasing power basis that China was indicated by the IMF to overtaking the US. By the end of 2014, China will make up 16.5% of the world's purchasing-power adjusted GDP (or $17.6 trillion), and the US will make up to just 16.3% (or $17.4 trillion). According to the study, however, it will still take some time for China to officially crossover in raw terms not adjusted to purchasing power.

The milestone had been predicted for a while, but it was only officially presented in IMF’s 2014 World Economic Outlook report. Financial Times praised the transference by noting that, by no earlier than 2005, China’s economy was less than half the size of the U.S. In addition to this, IMF has predicted the Chinese Economy will be 20% bigger than the US by the end of 2019.

The big change of power will is said to cause many shifts in strategic alliances for the country. China is now trying to secure its currency into the IMF’s Special Drawing Right (SDR), which is a global composite currency system used to foster international trade in the world’s top currencies, which includes the US dollar, the British pound, the Japanese Yen, and the Euro.

If the currency gets passed, it will be the first to do so in an emerging market.

by Sahla Ilham

#china #us #economy