Research Paper on China & US: Biggest Economies in PPP & Nominal Terms

Introduction

China and the United States are the biggest economies among the globe in both Purchase Power Parity (PPP) and the nominal methods. Since 2013 China overtook the United States in PPP, thus making both nations to share 34.27% and 40.74% of the global Gross Domestic Product in PPP and nominal terms (Foster and Robert 2017). The gross domestic product of these states is higher than third-ranked nations such as India (PPP) and Japan (nominal). Also, due to the high population in China, which appears to be four times higher than the United States, the difference per capita income is very high between China and the United States. For example, per capita income of the US is 3.32 and 6.38 higher than of the Chinas' PPP and nominal respectively (Kantarelis 115). The United States tends to have a trade deficit since it imports more products than it exports. China exports more product than it imports, leading to a trade surplus. Also, China ranks at seventy-fifth position on the PPP while the United States ranks on the twelve positions.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

On the other hand, China lags in foreign direct investments due to its reduced high tech exports. This gap might take less time to be covered since china is investing in education where 4% of its Gross Domestic Products has gone to training individuals. The young persons in China need higher education than those the United States hence making China's education system more significant around the globe (Kuang et al. 127). Also, the energy usage in China is much higher than in the United States due to its greater population size and geographic area. Therefore, the need for high energy amounts in China has contributed to more significant Carbon dioxide emissions in its environment than the United States.

Consequently, the Chinese government experiences different economic challenges such as management of the increased corporate debt, thus helping in the maintenance of financial stability. Also, the government experiences problems in facilitating the increased wage employment opportunities for college graduates and the middle class. This act has led to increased competitiveness of jobs in china hence leaving a more significant percentage of people without employment. The Chinese government is trying to reduce the industrial overcapacity, thus improving productivity through appropriate allocation of state support and capital for innovations (Lin et al. 1737). Therefore, economic development has continued in the coastal regions of china hence making people migrate to the urban areas to search for employment. Due to the continuous growth in population, china established a one-child policy, which helped in controlling its birth rate. Also, China is experiencing issues with the environmental deterioration in the northern region hence leading to soil erosion and air pollution (Rohde and Richard 2015). Therefore, the Chinese government set strategies which helped in minimizing these challenges, thus improving the lives of their citizens.

Additionally, after China-linked its currency to the US dollars, it ended up moving to an exchange rate system which references multiple currencies. In 2013 to 2015, the renminbi (RNM) rose to 2 per cent against the United States dollar (Zhang, Wenying and Weilong 1506). This improved market in China hence acquiring more revenue from the products exported to other nations. From 2013 to 2017, the Chinese economy snowballed with an average of 7 per cent of growth per year (Lin and Xiaoling 135). Therefore, since 2015, China strengthened capital controls and overseas investments, thus maintaining financial stability and managing the currency exchange rates.

The United States has a technologically robust economy with a gross domestic product of 57300 $. The United States firms are continuing to have technological advancement, especially in aerospace, computers, pharmaceuticals and military equipment (Rodriguez-Caballero, Carlos and Daniel 134). The business firms and private persons' in the United States makes various decisions and the state and federal government purchases the required products and services from the individual entrepreneurs (Chow 2017). This makes the United States corporations to enjoy a broader flexibility in their decisions than their competitors in Japan and Europe. The firms in the US lay off their surplus employees and develop foreign products hence improving their markets.

According to Morrison (34), the Chinese belt and the road initiatives (BRI) were established in 2013 to improve connectivity and economic integration with their trading partners and neighbors. The BRI main focus was to strengthen the coordination of the economic policies, infrastructure construction and help in achieving a similar prosperity. The BRI was open to every country that wished to trade with the Chinese. China was to finance this program, thus making other nations to benefit from it through the trade ties and infrastructural developments (Hoskisson et al. 1296). The initiative was led to provide a diverse boost to the Chinese economy as it might obtain good returns from its foreign exchange reserves (Shahbaz, Saleheen and Mohammad 9). Also, China could develop international businesses opportunity overseas for their business corporations. The initiative was set to establish a market for their industrial products in other countries, thus improving their markets. Therefore, through the BRI, China could enhance economic growth and development in their marginalized regions, thus improving the lives of people living in these areas (Yu 360).

Conclusion

Consequently, China established a New Development Bank, which was situated in Shanghai, and its goals were to fund every infrastructural project in the country. Also, the bank could give loans to the developing nations to improve their infrastructure, thus opening their marketing sector. China also launched the development of 100 billion dollar AIIB, which was set to fund the infrastructural projects in Asia and the surrounding nations. Fifty-seven countries joined this initiative hence obtaining funds to develop their economy (Sun 2018). Also, the made in China 2025 project was set to improve the competitiveness of industries in China, thus fostering their brands. This initiative led to the improvement of the Chinese economy as it boosted innovations and reduced the Chinese reliance on foreign technologies. Also, the initiative made China become the dominant world manufacturer of the different techniques which could be adopted by other nations (Li 48). The Chinese media indicated that these programs were set to make Chine become a world manufacturing power rather than being a manufacturing giant. For example, through the initiative "Made in China 2025" China will become the leading manufacturer of railway, telecommunication and the electrical appliances and power by 2025 (Morrison 34). Therefore, the strategies which China has set to achieve their set goals and objectives have raised queries among the United States policymakers and firms. This is contributed by the involvement of broad subsidies, directed policies to buy technology, protection of the private industries and increasing pressure on the new corporations that transfer technology to other nations. Therefore, even if the programs will fail, China will have created a broad market of its products and technologies, thus creating a more extensive capacity of equipment on the targeted industries.

Works Cited

Chow, Gregory C. Capital formation and economic growth in China. BRILL, 2017. Retrieved from https://www.visualcapitalist.com/china-vs-united-states-a-tale-of-two-economies/

Foster, John Bellamy, and Robert W. McChesney. The endless crisis: How monopoly-finance capital produces stagnation and upheaval from the USA to China. Monthly Review Press, 2017.

Hoskisson, Robert E., et al. "Emerging multinationals from midrange economies: The influence of institutions and factor markets." Journal of Management Studies 50.7 (2013): 1295-1321.

Kantarelis, Demetri. "A measure of net dependency between the economies of the USA and its major trading partners." Geopolitics, History, and International Relations 8.1 (2016): 113-145.

Kuang, Wenhui, Wenfeng Chi, Dengsheng Lu, and Yinyin Dou. "A comparative analysis of megacity expansions in China and the US: Patterns, rates and driving forces." Landscape and Urban Planning 132 (2014): 121-135.

Li, Ling. "China's manufacturing locus in 2025: With a comparison of "Made-in-China 2025" and "Industry 4.0"." Technological Forecasting and Social Change 135 (2018): 66-74.

Lin, Boqiang, and Xiaoling Ouyang. "Energy demand in China: Comparison of characteristics between the US and China in rapid urbanization stage." Energy conversion and management 79 (2014): 128-139.

Lin, Jintai, Da Pan, Steven J. Davis, Qiang Zhang, Kebin He, Can Wang, David G. Streets, Donald J. Wuebbles, and Dabo Guan. "China's international trade and air pollution in the United States." Proceedings of the National Academy of Sciences 111.5 (2014): 1736-1741.

Morrison, Wayne M. China's economic rise: history, trends, challenges, and implications for the United States. Washington, DC: Congressional Research Service, 2013, p34.

Rodriguez-Caballero, Carlos Vladimir, and Daniel Ventosa-Santaularia. "Energy-growth long-term relationship under structural breaks. Evidence from Canada, 17 Latin American economies and the USA." Energy Economics 61 (2017): 121-134.

Rohde, Robert A., and Richard A. Muller. "Air pollution in China: mapping of concentrations and sources." PloS one10.8 (2015): e0135749.

Shahbaz, Muhammad, Saleheen Khan, and Mohammad Iqbal Tahir. "The dynamic links between energy consumption, economic growth, financial development and trade in China: fresh evidence from multivariate framework analysis." Energy economics 40 (2013): 8-21.

Sun, Haishun. Foreign investment and economic development in China: 1979-1996. Routledge, 2018.

Yu, Hong. "Motivation behind China's 'One Belt, One Road'initiatives and establishment of the Asian infrastructure investment bank." Journal of Contemporary China 26.105 (2017): 353-368.

Zhang, Hongjun, Wenying Chen, and Weilong Huang. "TIMES modelling of transport sector in China and USA: Comparisons from a decarbonization perspective." Applied Energy 162 (2016): 1505-1514.