recently it's a big Hot Topic uh coming in the media that is whether China will ever be able to overtake the us as the largest economy in the world repeat whether China's GDP will be bigger than the US uh ever okay so first of all let me claim this is a bad question this is wrong question this is not the most interesting question uh uh we economists or other uh people should should be concerned about and uh even though this despite my claim which I will back up okay let me give you an answer first
okay even though this is a bad question my question is very simple that is in the coming decades maybe 10 year maybe uh 20 years ch's GDP okay will be definitely bigger than the US why super super simple reason let me give you a superficial reason and then give you a better reason okay The Superficial reason is China's population is more than four times as big as um the US okay it will only take less than 25% of per capita GDP for China to become the world's largest economy this is a simple arithmetic okay and
um it is unimaginable for China's per capita GDP to be always below 25% of the US this is a superficial answer okay not more substantial answer the reason for the recent decline of the Chinese GDP relative to the US is simply because of exchange rate and of course inflation in the US and deflation in China okay and this again will not be be able to continue okay look at today okay1 US dollar equals to 7.3 RMB but please come to China 73 Y in China uh carries much more actual economic activities than $1 dollar in
the US okay so so if you believe in any fundamental or simple principles of economics you will a believer that the exchange rate the market exchange rate will will gradually convert to the purchasing power of uh the currency themselves okay so the R&B definitely will have to appreciate against the US dollar down the road maybe 10 years maybe 5 years I don't know but I'm a strong believer in this regard okay now a more interesting answer is the following the US GDP has different structure from the US and a different valuation system of GDP than
the Chinese very specifically in the US More than 70% 70 is uh Services okay whereas in the Chinese eony this number is roughly 60% 60 and most importantly the service sector in the Chinese uh is much undervalued relative to the US let me give you one example you know in China most kids go to college uh 63% of our kids are in colleges okay and you know how much is the tuation the tuation is less than uh is less than $1,000 us for most universities in China of course there are some private universities which would
charge maybe something like um no more than $5,000 us as tuition whereas in the US a private university would charge as high as 50 or even 60,000 US dollar per year and for state universities I believe I I've been not even in the US many years but I believe it's certainly something like um 5,000 6,000 US dollar a year okay for out of States students much higher okay so this simple example tells us China's services including University education is much much much uh uh undervalued relative to the US so that's why the Chinese economy is
now only 60% of the US meanwhile if you count Goods by Goods whether it's automobile whether it's home appliances whether it's um is Furniture goods for goods China is easily twice as high as the US okay twice as high so this is a my reason why China's economy will be bigger than the US uh in the coming decades maybe 10 10 years maybe 20 years now my final points which I really want to you to pay attention to whether China's economy is bigger than the us or not this is a wrong question this is a
bad question this is a question for for people who don't think uh uh very very carefully okay about the the world affairs why because what we care what to be concerned is about the actual living standard of the peoples in the US and the peoples in China okay so the key question is we have to work hard we Chinese as policy makers Chinese economists work hard to make sure that Chinese people are able to enjoy uh higher and higher living standards currently one half of the population roughly 700 million of the whole population are not
living comfortably as they they deserve as they desire okay so they are not having enough Heating in the winter not having air conditioning in the summer okay and this is changing this is changing this is a source of China's future demand this is the source of China's future development of the economy okay so there is uh there is a hope for this okay so that's the first question we should be concerned we should ask ourselves whether Chinese people will be able to enjoy Better Living down the road the answer to me today is yes all
things indicate that we are still continue improving the living standards of Chinese people okay second concern we should ask or second question we should ask instead of the GDP okay is whether the Chinese scientific uh uh progress progress in science technology and also the Chinese progress in upgrading it its industry is continuing and the answer to this to me is is yes okay I am I was somewhat trained as an engineer when I entered chinai University as economics major one half of my courses were uh uh engineering courses so I know I've been kept up
with Engineers okay Chinese Engineers are huge in number okay the largest by far in number in the world and also they're working extremely hard China is catching up in engineering and techn and technology so in this regard I am um I'm optimistic Okay the third question which is even more important is whether China as a country is able to maintain economic Financial political and international stability okay that is whether China can avoid major economic recessions whether China can avoid major financial crisis whether China Society will be stable and whether China will not be uh too
negatively impacted by International uh volatility to this I am I'm pretty optimistic I think the Chinese people and also Chinese top policy makers are very very very cautious we don't want to be involved in any International conflicts we don't want to get into financial and economic issues okay so I again I in this regard I'm optimistic so to to give you to summarize number one I strongly believe the Chinese economy will be bigger in the US for for simple reasons we're such a large country okay second uh the right question to be concerned is whether
Chinese people will be able to enjoy better and better living standards yes the answer is most likely yes and whether Chinese industry and Science and science technology will continue improving the answer is yes and whether China will be able to avoid major volatility or instability uh the answer is I think most likely yes okay so any comments any questions I'm more than happy to to answer thank you
