Mongolia’s economy grew nearly 12 percent last year, the United States around 2 percent. So Mongolia grew around 6 times faster than the United States, yet of course the United States contributed more to GDP growth—over 150 times more. Why, because size matters.
Let’s apply this logic to China. A bigger but somewhat slower growing China of the future will contribute about as much to global demand as the smaller but faster growing China of before. This is arithmetic: An economy that is twice as big can grow by ½ as much and contribute the same to global demand. By the way, China today is more than twice as big as it was a decade ago.
So, the good news is, even with slower growth, China will continue to be an engine of global output. Indeed, an even bigger engine than before.
Filed under: Asia, Economic research, Emerging Markets, Globalization, growth, IMF, International Monetary Fund | Tagged: China, economic growth, exchange rate, Mongolia, PPP exchange rate, United States | 2 Comments »