Thursday, May 22, 2008

Angus Maddison Now Gives China Seven Years to Achieve Global Financial Dominance

22 May 2008

This story is too interesting to pass by without note.

It has become a cliché that China will be the next global superpower, surpassing the United States, according to most analysts, by about 2050.

Angus Maddison, Emeritus Professor at the Faculty of Economics at the University of Groningen, has a new twist on that hackneyed concept.

Maddison points out that Chinese assets are radically undervalued due to China's artificially debased currency and to ultra-low Chinese wages and infrastructure costs.

He has taken the China question apart and put it back together again in terms of purchasing power parity.

If we look at what Chinese assets are worth in reference to their objective value (rather than their currency exchange value), it turns out that at present rates of growth, China will be the dominant global superpower in only seven more years - by 2015.

That is an interesting idea, even if it is wrong (it could certainly prove to be wrong if there is a hard international recession and if China's over-built and narrow-margin export enterprises and tightly-stretched bubblicious economy get slapped hard by a global liquidity squeeze).

Want to know more? Click here for the Fortune story by Geoff Colvin.

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