Who knows if China will exceed Germany in terms of GDP by 2007?

When I went to China, I was always impressed by the speed of its development. Nowadays only the Gulf can rival that. Some people have expressed bullish views on China, saying that its GDP will overtake Germany by this year. If that’s true, China will become the third largest economy in the world, behind US and Japan

Xinhua, the official national news agency, reported on July 19, 2007, that China’s GDP in 2006 was higher than prelimianry figures

The Chinese government last week revised the 2006 GDP up by 146.4 billion yuan over the preliminarily calculated figure to 21.0871 trillion yuan (2.7 trillion U.S. dollars), moving the country even closer to overtaking Germany as the third largest economy

Deutsche Bank predicted that China’s economy will grow significantly in 2007

Deutsche Bank has raised its forecast for China’s economic growth in 2007 to 10.7 percent from 10.0 percent, as a growing list of investment banks revise their outlook after strong activity in the first five months of the year

But whose opinions should you trust? The opinion markets?

As a student of economics, I believe the market is the best predictor. There is an opinion (or inkling) market on the Internet, where people trade a stock on whether China’s GDP will exceed that of Germany. The stock price indicates the probability that China’s GDP will exceed that of Germany by the end of 2007

Here is the “stock price”, i.e. probability of China’s GDP exceeding that of Germany by the end of 2007

Here is the historical trend for the past week. The market has not changed much on its belief that China will have a ~70% chance of becoming the world’s 3rd largest economy. The stock price has been quite stable, hovering around $70

If it turns out that China’s GDP is greater than Germany’s, the stock will pay $100. Otherwise, it will pay $0

Do you want to express your views? Buy or sell opinion stocks here. If you are positive that China will overtake Germany, buy the stock. If you are negative, sell it. Even if you’re neutral, you can trade. Say, if you think there’s a 50/50 chance that Germany will still be the world’s 3rd largest economy in 2007, sell the stock because the price implies a 30% chance. If you are good enough at predicting what others think, you don’t even have to wait until the date of information release to take profits

Don’t worry as you’re just playing with fake money. If it’s for real, the markets will probably be much more accurate, as people will put in much more thinking before betting

I bought some stocks on this (China will overtake Germany), how about you?

Views on growth of Chinese economy

Bullish views

Colby Buzzell on Shenzhen’s (a city in Southern China, the tip of the Pearl River Delta) development

It’s a city of eleven million that did not exist twenty years ago. Now it’s home to 11 million people with “hundreds of construction cranes stalking the landscape like dinosaurs

Birth of a new economic giant - China

In short, we are now poised for the greatest economic boom the world has ever experienced. With two primary locomotives driving the economic growth - China followed by India

Neutral / cautious / uncertain views

CHINESE ECONOMY Be careful what you wish for

Cheap imports from China have helped to hold down prices in America and other developed economies. However, a flurry of recent reports suggesting that Chinese wages and prices are surging have triggered fears that China is now exporting inflation, rather than deflation, to the rest of the world

Obstacles to taming the “Dirty Dragon”

As incomes rise China’s environmental record will improve. Corruption can be tamed. This however all takes time

Bearish views

Questioning China’s Rise

Mathematically, if the overall economy were to grow 10 percent annually, and the 70 percent of the economy that is based in rural areas was not growing, as stated by the Chinese government, the economy in Chinese cities would have to be growing by 33 percent a year. The urban economy is growing rapidly, but not at a 33 percent pace

The Nightmare Crash No One Talks About

The mitigating factors in the Communist Chinese economy will cause much more pain than a Goldman Sachs hedge fund defaulting someday

Although the fate of cities often may depend more on luck than meticulous planning, Governments often try to spearhead development by launching grand projects. Officials are perhaps inspired by the few success stories, and the glory that come with them

One rare success story is the Buj Al Arab hotel in Dubai
Before the hotel, Dubai was a small town in the Gulf. Without much oil, it was economically and politically unimportant than UAE’s capital, Abu Dhabi. Completion of Buj Al Arab has marked Dubai’s transformation to a vibrant international city. Overnight, people have started flocking in. It gives hope, showing that nothing is impossible, if you have a dream. So the Dubai dream has attracted many international talents to work there. The city then enters a virtuous cycle. Everyday, new buildings are added and new grand schemes announced. It’s now one of the most dynamic cities to be in

Architectually, the hotel is a masterpiece. It combines Dubai’s tradition, sailing, fishery and pearl, with the most ultra-modern materials and design

I’ve learnt a lot from Buj Al Arab and Dubai. One lesson is that every great city needs a triggering structure. It needs to be stunning and inspiring to everyone. It needs to bring hopes to people and encourage them to dream bold. This makes me think of another masterpiece, the Eiffel Tower

For more information about the UAE’s economy, see the Economic Development section in the UAE 2006 report. Official sources, of course, will never associate a city’s success with emotional buildings

Having spent many years in East Asia, cities in the Gulf are amazing to me. Highways are everywhere, everybody drives, the poorer people take taxis. I still miss being able to walk across the street and buy groceries, travel to work by subway, and going to remote tours by train

Density in Gulf cities are a lot lower than in Asia. You’ll quickly notice this when looking at Google Earth, even without the help of official statistics. Zoom to the same scale, say, 5000 feet. East Asian cities like Tokyo, Singapore, and Taipei are full of buildings. In Doha, Kuwait City, and Abu Dhabi, it’s a yellow background punctuated by houses and grey highways

This means
- Gulf residents have to own cars to meet their daily needs
- The poor, elderly and disabled are more disadvantaged because they’re unable to drive or afford a car
- More roads are needed to move the same number of people

Even though oil is cheap for them, perhaps the heads of the Dubais should think about more compact city design, so their people will spend more time on the ground, less in their cars

Links on the topic of city planning
The Compact City and Social Justice
Melbourne 2030 - an important element in the plan is increasing pedestrian friendliness and use of public transport, while reducing use of private cars

From the Economist magazine, I learnt about an opportunity to do meaningful work in Vietnam, Laos and Cambodia. Some donor governments have set up an agency to develop economies in the so-called Indochina region. They need a team of people from overseas to kick start the project

The Indonchina region has so far bypassed the economic miracle enjoyed by other Southeast Asian countries. They have lots of natural resources and a young labor force. Right now, they’re a big exporter of drugs and prostitutes

Their people deserve better

Recently, I’ve heard comments that Kuwait is well positioned to become a major logistics hub in the Middle East. This is because Kuwait can serve as a gateway connecting Iraq and the world for imports and exports. Sounds like the Singapore-Malaysia and Hong Kong-China relationships in the past. But is it realistic?

Some logistics companies on the ground say it’s difficult, as it’s still dangerous to transport goods in Iraq. Some of their drivers, who were brave enough to transport supplies into Iraq, got kidnapped on the way. Their bosses had to pay ransoms. Now who wants to be the drivers if he may be kidnapped?

Sounds like until Iraq’s security situation improves, Kuwait’s role as a logistics hub remains limited