May 02, 2008

China 3rd largest economy

China (including Hong Kong and Macau) has a larger GDP than Germany based on current exchange rates. The Euro has traded down to 10.77 to the Chinese Yuan

The Euro/Yuan exchange rate will likely continue to fluctuate.

The European countries (France, Spain, Italy) have been saying that the Euro has been too strong. The US federal reserve has indicated that it will probably not cut US interest rates further. All factors that would indicate the Euro should continue to ease to the 10.5 level against the Chinese yuan over the next month. Then China would be third largest even without including Hong Kong and Macau.

China's economy could be 2.5 times that of the US by 2030, based on Japan's experience and the yuan's appreciation against the greenback, a senior Chinese economist says in Harvard Business Review's Chinese edition.

The forecast by Justin Lin Yifu, head of Peking University's China Center for Economic Research and chief economist-designate of the World Bank - in the May issue of the magazine published on Thursday - is one of the most ambitious for China's economic growth.

By 2030, it is possible that the per capita GDP of China reaches half of that of the Americans. Given that the Chinese population might be five times that of the US at that time, the Chinese GDP would be 2.5 times of the US.

The World Bank, where Lin will assume his post at the end of this month, said last month that China had surpassed Japan to become the second largest economy in terms of purchasing power parity.

China's GDP in 2007 was 24.66 trillion yuan ($3.38 trillion) and per capita GDP was $2,556, official figures suggest.

My projection is that China will get close to double the size of the US economy in 2030 on an exchange rate basis.

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