Shortly after a week-long Chinese national holiday, a piece of news hit the headlines on October 8, 2014. The International Monetary Fund announced that China’s economy, when measured by purchasing power parity, had become the world’s largest, surpassing that of the United States.
This news is widely recognized as a milestone in China’s breathtaking economic growth. China, however, is keen to downplay the significance of the purchasing power parity measure, because it is adjusted for national differences in the cost of living and fails to reflect the true scale of the economy when expressed in simple dollars. Nevertheless, many believe that in nominal terms China’s gross domestic product, buoyed by fast annual growth, will overtake that of the United States by 2025.
The money has gone East
But the rise of China need not mean the demise of the West