From Puru Saxe
Over the past decades, the US has been the engine of global growth; however its dominance will be challenged in the not too distant future. If my assessment is correct, China will replace the US as the world’s single most important economy. Before you dismiss my claim as a far-fetched fantasy, I want you to consider that China has the biggest population in the world, the largest foreign exchange reserves (over US$1 trillion), a booming economy, an extremely high savings rate and expanding surpluses. Moreover, its currency is extremely undervalued and China (despite extremely low per-capita consumption levels) has already surpassed the US as the biggest consumer nation.
Sceptics who doubt China’s role in the global economy should take note of the fact that Europe already imports more from China than it does from the US. To top it all, the US is the largest debtor nation the world has ever seen, its debt to GDP ratio is over 400% (Figure 1), it has a negative personal savings rate, its currency is overvalued and its society is heavily dependent on consuming cheap, imported goods