Ten years ago an economist predicted that China’s economic power would overtake that of America by 2020. That has come true—on one measure
To gauge a country’s economic “dominance” Mr Subramanian combined its share of world trade, net capital exports and global’s formula for allocating votes to its members. His index, he argued, successfully captured Britain’s economic hegemony in 1870, its rivalry with Germany in 1913 and its eclipse by America in the subsequent decade.
According to this measure, Mr Subramanian predicted, China would become the world’s most dominant economy by 2020. In the ten years since that forecast, China has faced a trade war with America, its growth has slowed and its currency has suffered bouts of volatility, obliging it to tighten controls on capital outflows. Yet Mr Subramanian’s central prediction has come true. Based on the book’s original formula, China became the world’s most dominant economy last year .
Mr Subramanian successfully predicted how his own index would evolve. But does his index successfully capture economic dominance? Other authors have included wealth,per person and other proxies for economic sophistication, as well as scale. These measures give America a bigger edge. For the sake of tractability, Mr Subramanian’s measure gives every dollar of exports equal weight. But some of America’s high-tech exports appear to give it an economic “chokehold” over China that is worth more than their market value. Mr Subramanian thought that China’s growing share ofand trade could soon elevate its currency into a rival to the dollar. But China’s yuan has made little headway.
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