China and Reality Based Policy

by Brad Peck

From the Washington Post:

China leapfrogged over Germany to become the world's third-largest economy in 2007...revised figures released Wednesday by the government statistics bureau show that its economy actually expanded by 13 percent to $3.38 trillion. That compares with Germany's 2007 GDP of $3.32 trillion...In 2007, the United States remained the world's largest economy with a GDP of $13.8 trillion and Japan the second-largest with a $4.38 trillion GDP, according to calculations based on an annual average of daily exchange rates by Merrill Lynch.... If China were to continue to grow at its current rate, economists say it could surpass Japan in as soon as three years and the United States in 18 years to become the world's No. 1 economy.

Indeed as the Post says "underscoring how quickly the concentration of global economic power has shifted."  In 1960 --the middle of the "three decades following World War II"-- West Germany's GDP was about 5.5x China's, ours about 36x.  To stay competitive we might want to focus on economic growth policies based on reality, not nostalgia.