China Surpassed USA as Largest Economy by Output

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The International Monetary Fund (IMF) recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the USA.The Chinese economy just overtook the United States economy to become the largest in the world from an output perspective. This by no means displaces the dollar. There is more to this than just output.

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Nevertheless, this is why we constructed long-term models. You cannot see the trend with just a few decades. Why did Christopher Columbus discover America? Because he was trying to find India. Why? That is where the money was. Between silk and spices, capital has flowed from the West to the East for centuries.

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As far back as 55BC, Cicero was warning about the trade deficit with China. The Emperor Marcus Aurelius (161-180AD) sent an ambassador to China. China knew of Rome and Rome knew of China. So these exchange back and forth has been going on a very long-term. Even during the Middle Ages, bankers were called “pepper-men” because pepper was worth more than gold by weight.

China is on its way to becoming the financial capital of the world. That may not unfold until the other side of 2032 for there is a lot more that needs to be accomplished, but China is on its way. When we made that forecast back in 1998, many thought we were nuts. Nevertheless, officially, the IMF numbers have shown that China surpassed the USA in volume. The view from China is clear – they see the USA as a superpower in decline.