Michel Chossudovsky from the Center for Research of Globalization in Canada argues that GDP is not representative of the actual strength of an economy, which could mean that China's economy is already the biggest in the world. China officially bypassed Japan as the number two economy in the world.
United States
Government type: Constitution-based federal republic; strong democratic tradition
Economy - overview:
The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $46,400. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace.
US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets.
US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II.
The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households.
China
Government type: Communist state
Economy - overview:
China's economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy.
Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment.
Annual inflows of foreign direct investment rose to nearly $108 billion in 2008. China has generally implemented reforms in a gradualist or piecemeal fashion.
In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the US dollar for years, China in July 2005 revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies.
Cumulative appreciation of the renminbi against the US dollar since the end of the dollar peg was more than 20% by late 2008, but the exchange rate has remained virtually pegged since the onset of the global financial crisis.
The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2009 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income.
Assignment to alt.politics Usenet conservatives:
- Explain how the economic system of China, a communist country, has been able to surpass the economy of the US.
- Explain this development using Supply side economic theory of Arthur Laffer.
source: CIA Fact Book
Bold-blue emphasis mine
Part of the answer is China's population = larger world-market share.
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