China's reawakening returns the status quo

By Saul Eslake, ANZ BankOctober 20, 2005

THE emergence of China (and India) as significant influence in the world economy and in world markets for tradeable goods and services, commodities, labour and financial assets is, arguably, the most significant change in global macro-economics since at least the breakdown of the Bretton Woods currency system in the early 1970s.
China is the second-largest economy in the world, having overtaken France in 1984, Russia in 1985, Germany in 1987 and finally Japan in 1995. If the long-term consensus projections compiled by Consensus Economics in April are vindicated, by 2015 China will have overtaken the US as the world's largest economy.
Even though China may rank No. 1 in terms of absolute size, in 10 to 15 years it will still be a relatively poor country. On the latest projections, China's per capita GDP will be barely more than one-fifth that of the US in 15 years and slightly less than a third of Japan's.
The prospect of China becoming the world's largest economy represents not an emergence, as it is usually portrayed, but rather a return to the order that has prevailed throughout most of human history. According to calculations by Angus Maddison, from at least the beginning of the common era until the early 19th century, China or India were the world's largest economies.