| China's coming on strong while our leaders | | | | be $2.225 trillion. On a purchase power |
| chase the terrorists across the globe. | | | | parity basis that figure is $8.859 trillion. |
| Recently much international press fanfare was | | | | In comparison the U.S. shows an economy of |
| generated acknowledging that China had | | | | $12.49 trillion based on exchange rates and |
| replaced Great Britain as the world's fourth | | | | $12.36 trillion based on purchase power |
| largest economy. Nobody argues nowadays that | | | | parity. Based on exchange rates, China is the |
| China has the highest growth rate of | | | | 4th largest economy in the world. But based |
| industrialized economics posting annual | | | | on purchase power parity China is clearly |
| growth rates in excess of 8.5 percent | | | | number 2. And the Factbook acknowledges, |
| according to The International Monetary Fund. | | | | Measured on a purchasing power parity (PPP) |
| The World Bank predicted recently that | | | | basis, China in 2005 stood as the |
| China's economy will grow 10.4 percent this | | | | second-largest economy in the world after the |
| year and 9.3 percent in 2007. In contrast, | | | | US.... Noted magazine, The Economist |
| the United States is in the 2 to 3 percent | | | | reported, By 2020, China will narrowly |
| range. What's not been said by our less than | | | | outstrip the United States in GDP. China |
| candid leaders is that China is already the | | | | already exceeds the U.S. in production of |
| second largest global economy and has held | | | | many strategic minerals and metals. And its |
| that spot for sometime and catching the U.S. | | | | industrial base is now larger as well. |
| very quickly. The Chinese economy is already | | | | According to the Factbook China's industrial |
| 72 percent the size of the U.S. economy. One | | | | output now stands at 4.19 trillion dollars as |
| only need reference the 2006 CIA World | | | | compared to 2.52 Trillion for the United |
| Factbook. There it is for the whole world to | | | | States. Chinese annual industrial growth is |
| see. A country's economic output is | | | | 29.5 percent but only 3.5 percent here in the |
| measured, and compared to other countries, by | | | | U.S. Another significant trend worth noting |
| a standard known as GDP, or Gross Domestic | | | | is leadership in world trade. A recent Wall |
| Product, which is measured in two ways, one | | | | Street Journal article written by Andrew |
| by international exchanges rates and by | | | | Batson and Shai Oster reports that Egypt's |
| purchase power parity. Exchange rates are the | | | | trade with the China will exceed that of the |
| norm used by most private and public | | | | United States by the year 2012. And this |
| international agencies. But more recently | | | | trend is evolving with many countries, even |
| experts have suggested that international | | | | in our own hemisphere. America's eroding |
| exchanges rates distort the true picture. | | | | industrial base is compromising the nation's |
| Value distortions exist between the | | | | military capabilities. This was recently |
| currencies of the trading nations, in | | | | highlighted in the Pentagon's 2005 |
| particular, when currencies are something | | | | Quadrennial Defense Review when it concluded, |
| less than free-floating in the open market. | | | | Sourcing and production is now global, with |
| The Chinese Yuan is mostly a fixed-rate | | | | considerable implications for the industrial |
| currency pegged to the value of the U.S. | | | | base. This same Defense Department study |
| Dollar. The exchange value is only changed by | | | | raised alarm bells about China when it |
| Chinese government, a little at a time | | | | concluded, the industrial and economic power |
| generally to appease the U.S. Congress. | | | | wielded by China, and how this relates to the |
| Therefore GDP figures between the two nations | | | | country's political and military aspirations, |
| are distorted. Countries with free trading | | | | is seen as a cause for concern. But our |
| currencies can safely use exchange rates as a | | | | leaders already know this stuff. They just |
| measure of comparison between their | | | | need to level with the American people |
| respective GDP's. In the absence of free | | | | instead of spoon feeding them statistical |
| trading, purchase power parity is used as the | | | | manure. Soon we will be Number Two. And let's |
| standard of comparison. Purchasing power | | | | not forget the echo of Khrushchev's |
| parity equalizes the purchasing power of | | | | thundering UN speech 50 years ago declaring |
| different currencies in their home countries | | | | the East will overrun the West. It's |
| for a given basket of goods. This is often | | | | happening before are very eyes. |
| used by global economists, and our CIA, to | | | | |
| compare the economic output countries. The | | | | James Silvester is a small biz author and |
| difference in an exchange rate and purchase | | | | consultant. He has written 4 best selling |
| power parity analysis of the China GDP is | | | | entrepreneurial books with a 5th on the way, |
| nothing less than astonishing and should be | | | | and has appeared on many radio and TV shows |
| downright frightening to American leaders. | | | | including MSNBC. The books have forewords |
| For example, on an exchange rate basis, the | | | | contributed by the Virginia Governor and a |
| CIA World Factbook estimates China's GDP to | | | | U.S. Senator. |