The Future of the Economies

China Economy In 2050

As a major player on everyone's lips, China, the world's fastest-growing economy, is set to overtake
the United States as the biggest economy globally by 2050, according to a PricewaterhouseCoopers
report.

Although China's growth is expected to slow from the current high rate, it will surpass the United
States based on purchasing power parity by 2050 and lead seven other emerging countries to
overtake the Group of Seven, or G7, as the world's biggest economic bloc, the report said.

Purchasing Power Parity, or PPP, is a currency conversion measure that uses a common currency
and equalize the purchasing power of different currencies. In other words, the PPP eliminates the
differences in price levels between countries in the process of conversion.

The Emerging Seven economies, or E7 as the PwC coined it, will by 2050 be around 25 percent
larger than the current G7 when measured in US dollar terms at the market exchange rates or
around 75 percent larger in PPP terms.

The E7 includes "BRIC" - Brazil, Russia, India and China - plus Indonesia, Mexico and Turkey.

In contrast, the E7 is currently only around 20 percent the size of the G7 at market exchange rates
and around 75 percent of its size in PPP terms.

"China and India are the two important markets to drive up the E7 economies," said John
Hawksworth, head of the macroeconomics unit of PricewaterouseCoopers based in London, and the
author of the report, in Shanghai.

China, despite its projected slowdown in market growth, is forecast to be around 95 percent the size
of the United States at market exchange rates by 2050 or about 40 percent larger in PPP terms.

China's economy expanded 10.2 percent in the first quarter after soaring 9.5 percent last year.

Growing rapidly as a major player, China is also burdened with some problems which may hinder
its growth.

The declining working age population, or those between 16 years and 50 years, will be one
disadvantage for China while India, a relatively young economy, will gain from its growing
working population.

Better education, higher energy efficiency and the development of the country's financial sectors are
suggestions offered for a healthy economic expansion.

"China needs to diversify its capital markets besides focusing on the banking sector," he said,
adding that the securities and corporate bond sectors are areas where expansion is pending.
In 2050, the Chinese economy will reach $123 trillion, ornearly three times the economic output of the
entire globe in 2000. China's percapita income will hit $85,000, more than double the forecast for the
EuropeanUnion, and also much higher than that of India and Japan. In other words, theaverage
Chinese megacity dweller will be living twice as well as the averageFrenchman when China goes from a
poor country in 2000 to a superrich country in2040. Although it will not have overtaken the United
States in per capitawealth, according to my forecasts, China's share of global GDP -- 40 percent --
willdwarf that of the United States (14 percent) and the European Union (5 percent)30 years from now.
This is what economic hegemony will look like.

By 2050 China will have eradicated poverty, established itself as a world power in science and
lifted the average lifespan of its billion-plus citizens to 80 years, according to two blueprints for the
future published yesterday.

Even by the standards of a country that has a passion for long-term economic plans, the targets -
which foresee the relocation of 500 million peasants to cities, huge investment in biotechnology and
the addition of hundreds of millions more cars to the streets - are ambitious, but give an indication
of how the nation would like to see itself in the middle of the century.

They are likely to generate a mixed response in the outside world, where respect for China's success
in raising living standards is mingled with fear that Beijing is emerging as a military rival to the US
and an environmental menace to the planet.

The social projections are contained in the China Modernisation Report 2006, drawn up by the
country's leading research institute, the Chinese Academy of Sciences. If the country can maintain
its current 9% rate of economic growth, it predicts the average income in China will rise to $1,300
(£750) a month, about 10 times the current level.

In the past 25 years of expansion China has lifted an estimated 300 million people out of poverty,
but there are still more than 80 million living below the government's poverty line of less than 668
yuan (£48) a year. By 2050, the institute predicts that nobody will have to subsist on such a meagre
income and everyone will have access to social services.

It says the middle class will also enjoy an affluent lifestyle that only a small minority can currently
afford. Half the population - which will grow to about 1.5bn - will own their own car and be able to
afford overseas travel.

The forecast is predicated on the transition of China from a predominantly agricultural society to a
suburban, knowledge-based economy. This will entail moving 500 million rural dwellers into
industrial cities, then 600 million city dwellers into hi-tech suburban homes. By 2050, 80% of
urbanisation will be completed, the report says.

The authors admit the targets will be hard to achieve. He Chuanqi, who headed the research team,
told local reporters that China's economic situation is 100 years behind the US and there is only a
6% chance of his forecasts being realised.

He warned of problems emerging along with changing life styles and expectations, particularly
because social change lags behind economic modernisation.
A bigger threat is likely to be to the environment. China is already the world's second biggest
emitter of greenhouse gases. If the predictions of a surge in car ownership and air travel are correct,
it will far surpass the US as the major cause of global warming.

In a separate report, the state council (China's cabinet) announced plans to boost investment in clean
energy and nuclear power along with 14 other areas of scientific research. By 2020, it said, the
country should be spending 2.5% of its gross domestic budget on research and development, double
the current level.

By that time China would be one of the most advanced nations in the world in biotechnology and
space exploration, fostering a "large number of world-class scientists and research teams", and
making major breakthroughs in energy exploration, energy-saving technology and clean-energy
technology.

In the military field, it called for increased spending and forecast "the development of modern
weapons and informationisation of the army to provide assurance for the safeguarding of national
security".

Overall, it predicted a steady increase in new patents and groundbreaking scientific papers that
would enable China to claim a place as a major power in science and technology by 2050.

Indian Economy in 2050

India will be the third largest economy in the world after China and United States by 2050, a US-
based internationally recognised foreign-policy think tank has said.

An article "The G20 in 2050", carried in November bulletin of the Carnegie Endowment for
International Peace said, "China, India, and the United States will emerge as the world's three
largest economies in 2050. Their total GDP, in real US dollar terms, will be over 70% more than
that of the other G20 countries combined."

Other main findings include, China will become the world's largest economy in 2032, and grow to
be 20% larger than the United States by 2050. Over the next forty years, nearly 60% of G20
economic growth will come from Brazil, China, India, Russia, and Mexico alone.

The article was written by Uri Dadush and Bennett Stancil. A Frenchman and former director of
World Bank, Dadush is the director of the International Economics Programme at the Foundation,
and Stancil is a Fellow at the Programme.

"In China and India alone, GDP is predicted to increase by nearly $60 trillion--the current world
GDP--but the wide disparity in per capita GDP among these three will persist," they noted.

India's annual average GDP growth between 2009-2050 is predicted to 6.19 per cent, and these
emerging markets will not rise among the world's richest countries in per capita terms- their average
income in 2050 will still be 40% below that of the G7 nations presently.

Stressing that the world's economic powers are shifting dramatically, the economists noted that the
"G20's recent transformation into the world's principal economic forum highlights the beginning of
a more integrated and complex economic era."
Over the next 40 years, the G20 GDP is expected to grow at an average annual rate of 3.6 per cent,
rising from USD 38.3 trillion in 2009 to USD 161.5 trillion in 2050, in real US dollar terms.

Nearly 60 per cent of this USD 123 trillion dollar expansion will come from Brazil, Russia, India,
China and Mexico (BRIC+M).

The experts also find that out of the G20 countries, "India is predicted to grow most rapidly, but its
current modest size will prevent it from surpassing either China or the United States in real US
dollar terms."

The authors observe that the growth could be even faster, but the low quality of education,
infrastructure, governance, and business climate will hold back progress in developing countries.
Technological convergence is expected to be lower in India and Indonesia than in China and Russia.

India's Purchasing Power Parity (PPP) will be 97 per cent as large as that of the United States by
2050. India is expected to become the world's most populous nation in 2031--and an average
exchange rate appreciation of 0.9 per cent per year will push annual GDP growth to an average of
6.2 per cent, according to the study.

"India's US dollar GDP will balloon to USD 17.8 trillion in 2050, sixteen times its current USD 1.1
trillion level," write Dadush and Stancil.

On the future of Europe, the report stresses that "to retain their historic influence, European nations
will increasingly need to conduct foreign policy under an EU banner, a shift implied by their
recently ratified constitution." It warns that the once great power Russia may be marginalised in the
new economic order if it remains outside regional coalitions.

Currently, Germany, the UK, France, and Italy are the fourth through seventh largest economies in
the world. By 2050, the UK, helped by demographic trends, will be the largest of the four, ranking
seventh in the world. Italy will be the smallest, ranking fifteenth.

PPP GDP in these four countries will be less than half of that in India and less than one-fourth of
that in China, the report finds.

Of the G20 countries, India is predicted to grow most rapidly, but its current modest size will
prevent it from surpassing either China or the United States in real U.S. dollar terms. India’s PPP
GDP, however, will be 97 percent as large as that of the United States by 2050. A growing
population—India is expected to become the world’s most populous nation in 2031—and an
average exchange rate appreciation of 0.9 percent per year will push annual GDP growth to an
average of 6.2 percent. India’s U.S. dollar GDP will balloon to $17.8 trillion in 2050, sixteen times
its current $1.1 trillion level.

Former World Bank Chief James Wolfensohn declared in one of his speeches that soon GDP India
and GDP China will witness an overwhelming growth that will transcend the G7 countries, that
includes United States of America, Canada, France, Germany, Italy, Japan, and United Kingdom. It
is assumed that by the year 2050, both India GDP and China GDP will witness a gargantuan
growth. The current GDP of China is USD two trillion which is predicted to reach USD 48.6 trillion
by 2050. On the other hand, India's current GDP is USD one trillion, which will become USD 27
trillion by that time.
Reasons why India will rise:
1) Manufacturing productivity will drive growth. It’s performance will improve due to
globalisation and increased competition.
2) India’s economic reforms are the reasons for this astounding predicted growth. India’s
“increased openness to trade, investment in information and communication technology, and
greater financial deepening.”
The fact that the previous chairman of Goldman Sachs Henry Paulson is today the treasury
secretary in the Bush administration is also significant.
Some more important points from this report:
1) Growth for BRIC countries will slow at the end of this period.
2) Individuals in the BRIC countries will still be poorer on an average than individuals from
the G6 countries, with the exception of Russia. China’s per capita is expected to be $30,000,
approximately what it is for the developed nations today.
3) Local spending patterns will change and this will impact the demand and pricing of
various commodities and products.
4) Companies who do business globally will benefit.
5) BRICs economies in the next 40 years will be larger than the G6 in US dollar terms!
Currently they are worth less than 15%.
6) Russia could overtake UK, Germany, France and Italy.
7) China could overtake Japan, Germany and lastly by 2039 – the US.
8. Of the current G6 countries, only two may remain in the G6 – US and Japan.

USA Economy In 2050