Sunday, March 24, 2013

Global Impact: OECD Predicts That China Will be Top Economy by 2016, While US, EU Sputter

According to EFE, the Organization for Economic Cooperation and Development (OECD) is predicting that with China's economy positioned to grow by 8.5% this year and 8.9% in 2014, China could become the world’s largest economy by 2016, if it fully implements a series of regulatory, market, socioeconomic and tax reforms.

COMMENT: One dominant factor is the economic equation for China is that it is becoming less and less dependent on exports and consumption has recently been a bigger driver of growth than investment.

The OECD report expressed optimism about the political will of China’s new leaders, President Xi Jinping and Prime Minister Li Kequiang, to implement needed reforms.

Interestingly, China's economy grew by only 7.8% in 2012, influenced largely by of continuing productivity woes in both the US and the EU, China's two largest trading partners.

Thus, it is no surprise that China is moving aggressively toward securing raw materials and commodities in Latin America, Asia, the Middle East and Sub-Saharan Africa. 

Unless the US and EU strategically and quickly focuses on economic productivity rather than being the "world's policemen,"  a role they have not been particularly successful at, both entities could find themselves having to learn Mandarin.