InvestorPlace Asia

China May Become Second-Largest Economy by 2010

Robert Hsu, March 31, 2009

In recent months, all eyes have been on the U.S. How the country responds to the global financial crisis has a huge effect on the rest of the world, so investors and economists alike have been paying close attention to what steps the U.S. takes to turn its economy and stock markets around.

However, even with all of these efforts, the U.S. is still suffering from economic turmoil. This year, the country hopes to post a barely positive GDP, and looks for an economic turnaround by 2010 at the earliest. The country will likely remain the world economic superpower, but there is another country that is running close behind -- China.

In fact, it is possible that China will overtake Japan to become the second-largest economy in terms of nominal dollars by 2010, according to the China Policy Institute of University of Nottingham. This prediction is a big change from last year's expectations of the country attaining this title by 2018.

China Policy Institute's prediction is largely founded on the expectation that the U.S., UK, Japanese and German economies will not recover until at least 2010. So while China's economy continues its expansion of around 7% this year, it will be gaining significant ground ahead of other developed countries.

Of course, China has been hit by the global economic crisis. But, unlike other countries, China's government has responded quickly with stimulus and interest rate cuts. And the result has been the creation of a stronger Chinese economy.

As I just mentioned, China's economy will likely grow by about 7% this year. And while this is a bit of a drop from 2007's 13% GDP growth, it is still very impressive, considering that only a few countries will post positive economic growth this year. With this impressive expansion, the gap between China and the U.S. and Japan is quickly shrinking -- and so is the gap for China to become the world's economic superpower.

That's why I recommend that we invest in the fantastic growth story. China's economic strength is matched by no other country right now, and I look for it to continue its growth in the coming months and years. So to invest in the best plays that China's economic expansion has to offer, join China Strategy today!