China Stumbles in Race to Pass U.S. as World's Biggest Economy

For the first time in almost a decade, China has lost ground in catching up with the U.S. economy, when output is measured in dollars. 

U.S. gross domestic product increased $590 billion in 2015 from a year earlier, according to data released Friday. China’s economy, while reporting 6.9 percent growth for the year, added $439 billion, as a weaker yuan sapped the value of output gains in dollar terms, according to data compiled by Bloomberg.

“The U.S. has come back from the financial crisis with robust technology innovation leading the recovery, while China’s economy is heading down,” said Niu Jun, an international-relations professor at Peking University. “The number itself isn’t a specific reason for being either too optimistic or pessimistic, but if China can’t successfully reform its economy, the real gap between the two will expand, and it will take longer for China to catch up.”

Last year was the first time since 2006 that China made no progress in closing the gap with the world’s largest economy. While the U.S. economy expanded 2.4 percent for a second straight year, China slowed to the weakest expansion pace in a quarter-century as old growth drivers like heavy industry and exports slow.

As for 2016, China’s economy is forecast to expand 6.5 percent in real terms, while the yuan is projected to depreciate to 6.79 against the dollar, down more than 7 percent from the average level in 2015.

“Whether China can catch up the U.S. in dollar terms is not important, but whether China can sustain its development is,” said Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. “As long as China can expand 5 percent a year in the next decade, it’s only a matter of time until it surpassed the U.S.”

http://www.bloomberg.com/news/articles/2016-01-29/china-stumbles-in-race-to-pass-u-s-as-world-s-biggest-economy