China to become world’s largest economy
China is on track to pass the USA as the world’s largest economy within ten years, according to economist Jun Ma, of Deutsche Bank.
As reported in The Australian, Hong Kong-based Ma says the US will be more dependent on Chinese demand and “in 10 years’ time, China will be bigger than the US in GDP and a bigger source of imports than the US”.
Growth rates are now at about nine percent, he said, but China will also have to watch for inflation: “There was inflation of 20 per cent in 1994. That is not an acceptable scenario.”
China’s growth will also have an impact on countries like Australia that supply iron ore. As a result, iron ore demand and prices have risen but will need to correct, he warned.
“One of the implications of the China market being too bullish was that steel demand and prices and demand for iron ore rose,” said Ma. “When it corrects on the downside, iron ore prices will fall in the near term … I think there’s more downside to come.”
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