Status of Economy of the USA and China - Research Paper Example

Introduction United s of America is considered a superpower of the world. It was once considered an economic model to be followed as it applied the system of laissez-faire. With rapidly booming technology in the 1990s, the American economy surpassed greatly. The US economy today is in great turmoil. However, today the USA is going through the worst recessionary period of all time. After the Great Depression of the 1930s, this recession had the worst impact on the economy of the USA. Although, the government is carrying out various fiscal stimulus and measures to disentangle itself from this recessionary phase but up till now it has not been able to do so.

As a result, the Current Account Balance has been continuously deteriorating. It has not been long since China gained its position as a sovereign independent state. Initially, a centralized system or a planned economy was being focused upon. But later, the Chinese economy became more reliant on market-oriented techniques and by the year 2000, the output of China quadrupled (CIA Factbook). Today China is the epitome of prosperity and economic development. It is the economic giant of today’s world.

Its main focus has been on the manufacturing sector and is the major exporter of different goods and services. In this recessionary phase, China has managed to be coped very tactfully. With rising production and employment generation, not only the standard of living is being improved in China but also the economic position of China is being strengthened extensively. China manages to maintain a positive Current Account Balance in this phase of the depressing worldwide economy. Additionally, China owns a large amount of foreign reserves to back its economy as well.

The demographics of both countries are different in the sense that China has the largest population in the world whereas, the USA is number 3. The 16-64 age group has the greater part of the population of China which is about 76% as compared to America’s 68% (approximately). This means that in comparison, China has a larger labor and working-class comparatively. However, it is a fact that human resource development in the USA is lower and the labor/manpower is extremely expensive. In comparison, China has an abundant resource of manpower that is cheap and thus, contributes greatly towards its GDP.

Economic Indicators United States of America China GDP (PPP) $14.72 trillion (2010) $9.872 trillion (2010) Real GDP Growth 2.7% (2010) 10.3% (2010) Per Capita GDP (PPP) $47,400 (2010) $7,400 (2010) Unemployment rate 9.7% (2010) 4.3% (2009) Pop below Poverty Line 12% (2010) 2.8% (2007) Inflation Rate 1.4% (2010) 5% (2010) External Debt $13.98 trillion (2010) $406.6 billion (2010) Current Account Balance -$561 billion (2010) $272.5 billion (2010) Foreign Reserves $130.8 billion (2009) $2.622 trillion (2010) Military Expenditures 4.

06% of GDP (2005) 4.3% of GDP (2006) Source: CIA FACTBOOK https://www.cia.gov/library/publications/the-world-factbook/geos/us.html https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html The above table shows the basic economic indicators of the two countries. The GDP of the USA is increasing rapidly. It is in line with the GDP of the USA and in a few years it is estimated to exceed that of the USA. A stronger indicator is the real GDP growth of China which is the highest in the world. If compared with the real GDP growth of the USA, it is very high.

This further emphasizes the grave effects of the recession on the USA. China further, has very high foreign reserves and the external debt is considerably low than that of the USA. Thus, in comparison, the economy of China has indicators that are significantly better than the USA. The USA is one of the greatest importers of oil. Its main imports are capital goods which are about 30.4% and its main exports are composed of capital goods as well 49% (CIA Factbook). Similarly, China exports most of the manufactured goods.

Both USA and China produce agricultural goods as well so as to sustain their economies. Conclusion The above evidence reflects the status of both economies economically. It would be quite fair to say that the USA is losing its essence in the race to being an economic superpower. On the other hand China with its exceptional economic indicators has become a giant economy of the world. Thus, it will be no late when it would be recognized as one of the superpowers of the world.