Is China a Threat to the U.S. Economy?
LIBRARY OF CONGRESS WASHINGTON DC CONGRESSIONAL RESEARCH SERVICE
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The rise of China from a poor, stagnant country to a major economic power within a time span of only 28 years is often described by analysts as one of the greatest economic success stories in modern times. From 1979 when economic reforms were first introduced to 2006, Chinas real gross domestic product GDP grew at an average annual rate of 9.7, the size of its economy increased over 11-fold, its real per capita GDP grew over 8-fold, and its world ranking for total trade rose from 27th to 3rd. By some measurements, China has become the worlds second largest economy, and it could be the largest within a decade. Chinas economic rise has led to a substantial growth in U.S.-China economic relations. Total trade between the two countries has surged from 4.9 billion in 1980 to an estimated 343 billion in 2006. For the United States, China is now its second largest trading partner, its fourth-largest export market, and its second-largest source of imports. Inexpensive Chinese imports have increased the purchasing power of U.S. consumers. Many U.S. companies have extensive manufacturing operations in China in order to sell their products in the booming Chinese market and to take advantage of low-cost labor for exported goods. Chinas purchases of U.S. Treasury securities have funded federal deficits and helped keep U.S. interest rates relatively low. Despite the perceived threat from China, the U.S. economy has recently maintained full employment and robust economic growth. To date, the growth in Chinese exports appears to have come partly at the expense of Asian competitors. However, the emergence of China as a major economic superpower has raised concern among many U.S. policymakers. Some express concern that China will overtake the United States as the worlds largest trade economy in a few years and as the worlds largest economy within the next two decades.
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