Some information is adapted from measuringworth.com
Some information is adapted from measuringworth.com
The results from the tables indicate that our selected country in table 1 i.e. China as compared to USA in table 2 has lower GDP figures. Much as the GDP is seen to be increasing steadily in the two economies from the year 1994 to 2008, it is also clear that the rate of increase of GDP for China is much higher that of the USA in the same period. However the USA GDP is much higher than that China. In 1994 the GDP of China which is US$582,656,000,000 compared to USA which is US$8,870,700,000,000 show how big the gap between the earnings of the two countries was. When compared on the figures of 2008 we also see that China has GDP of US$ 4,549,504,000,000 and the USA has the figure of US$ 13,161,900,000,000. We see that up to 2008, the gap between the earnings and production of the two countries was still large as compared on real terms.
When we compare these figures on the GDP growth rates, we see that China’s GDP was increasing up to the year 1994, but decreased up to the year 1997 but it was still in double figures. This decline continued up to 1999 at 5.3% before it rose again and the growth has been steady and in double figures because we clearly see that in 2008 the GDP growth rate was 29.8%. This is however a sharp contrast to the rates of the USA as we see from the table 2 that the GDP growth rate in 1994 was 2.6%. The GDP growth rate of the USA is not really certain in terms of increase and or decrease. There is no certainty and prediction in the growth of the GDP of the USA. However we see that in the year 2008, the GDP of the country fell. Whereas the growth rates of the GDP of China has been growing steadily for the period considered, the rates of USA are low in fact growth rates below 5%, and in fact it fell to negative in 2008. While the growth of China’s economy in the considered period averaged 10%, the economic growth of the USA averaged around 2.5%.
On the scale of the balance trade of the two countries, we find that as from the two tables, the USA has better balance of trade than China in the period compared. This is a direct result of the fact that while the USA has high exports and low imports which makes a much favorable balance of trade, China has exports and imports are not very much different. The gap between the exports and imports are much the same for the fact.
The economy of China has steadily been good averaging growth of 10% between 1994 and 2000, but this is despite the Asian financial crisis which marginally affected it. This was marginally affected by decreased foreign direct investment and sharp drop in the exports because the neighbours were not doing well economically at the time. However the rest of economic growth was bolstered by the huge reserves that China has been holding and the fact that its currency is not freely convertible. In the same period, China attracted capital inflows that would consist of long term investment. This made the China retain an economy which was protected from the regional crises and we note that this country has always resisted calls to devaluate its currency. This currency has remained a stabilizing factor in the region (Giovanni). This is not to say however that China has not faced internal problems like slow growth and rising unemployment which were enhanced by a financial system which was burdened by bad loans. In the period after 2000, the economy still averaged above 10% per year, which was in fact the highest in the world. This brought the economy to be ranked the second largest next to the United States. In the few years to come, it documented, China will overtake the United States as the largest economy.
It is also true that China has a burden to meet in terms of creating employment for its large population (largest in the world). However because of its large labour force, the labour in China is cheap compared to the economies like the USA and Europe. This therefore has lead to firms from the west to transfer and establish production lines and plants in China and the united states is a victim, ( this was a topic in the last us election campaign debates between president Obama and Mitt Romney). This has therefore led to much more foreign direct investments to China than any other economy. According to Morrison (2012), China is the largest destination of foreign direct investment, the largest manufacturer, largest holder of foreign exchange reserves, the largest creditor (the United States is the largest debtor nation).
With respect to inflationary rates of the United States and china, it observed that prior to 1994, the inflation in china was high and this could be attributed to the Asian financial crisis at that time. Inflationary rates started to fall after 1995 to 2000 when it was negative in the year 2002. After that year the inflation rates have been rising and we observe that around 2008, the inflation is above 5%, this could also be attributed to the global financial crisis which mostly affected the trading partners of china. On the other hand we observe that inflation of the United States has hovered around the figure of around 2% and below, apart from periods when it went up to above 3%. We observe that the United States economy is more developed and has almost an efficient and or perfect system as compared to what is obtaining in china. The destabilizing factors for the United States are mainly wars and the recent global financial crisis which basically started there.
With regard to trade, we clearly observe that of the two countries, china is a bigger trader than the United States. While the tables show that the exports in the United States are below 10% of the GDP and the imports are much smaller at round below 1%, the results indicate that china relies more on trading with other countries despite its large population which is supposed to create a big domestic market. According to Morrison w (2012), china is the largest exporter and largest importer of merchandise. It trades more the United States, Europe and the Africa states.
Works Cited
Giovanni, Andrea. C. “Changes In The Distribution Of Income Over The Last Two Decades: Extent, Sources and Possible Causes” University Of Florence.
Johnson, Loius and Williamson, Samuel, H., “What Was The US GDP Then”. Measuring worth, 2011. URL:
Morrison, W. “China’s Economic Conditions. CRS Report for Congress”. Congressional Research Service. 2012
.Officer,Lawrence,H and Williamson, Samuel, H. “ The Annual Consumer Price Index For The United Stated 1774-2011”. Measuring worth 2012 . URL:
