The International Monetary Fund (IMF) recently made a bold prediction in its latest report that China will exceed the United States and become the world's largest economy as early as 2016 in terms of purchasing power parity. Previously, most analysts believed that the United States would give away its position as the largest economy after a few decades. The IMF's forecast shows that according to the current growth rate, China's economic size will reach $19 trillion in 2016 from the current $11.2 trillion.

Tao Wenzhao, a research fellow at the Center for U.S.-China Relations of Tsinghua University, and Chen Fengying, Director of the Institute of World Economic Studies at China Institutes of Contemporary International Relations, gave their views on the prediction. They argued that the IMF's purchasing power parity (PPP)  method was not accurate, and thus the prediction that China's GDP will exceed that of the United States in five years is probably too bold. 

The PPP method is one of the over 30 exchange-rate calculation methods. This approach has some truth, yet most countries and economists don't use it. 

Last year's annual average market exchange rate between Renminbi and the U.S. dollar is about 6.77, while the exchange rate calculated by the PPP method is 4.066. The difference is obvious. That's why some reports said China's GDP in 2010 was $5.87 trillion, while some claimed that the figure was $10 trillion. 

If it's calculated based on the market exchange rate, China's GDP in 2016 will total $11.22 trillion, while that of the United States will remain $18.8 trillion. If it's calculated this way, China's GDP will exceed that of the United States by 2020. 

If the PPP method is used to assess the national economic strength, the GDP of developing countries is likely to increase. Experts hold that PPP is not a good method to measure the overall GDP. 

The future economic development of China and the United States depends not only on their own factors, but also on the global economic environment. First, the U.S. economy is continuing to grow. If the recovery is positive, it will maintain a growth rate of 3 to 3.5 percent this year, with its GDP accounting for about 27 percent of the world's total. Currently China's overall GDP is only a little over one third of that of the United States. Second, during China's 12th Five-Year Plan (2011-15) period, the country plans to reduce its economic growth at the rate of 7 percent. Therefore, the previous growth rate of 10 percent or 11 percent should not be used for future reference. Third, many complicated world economic factors may also have an impact on China's economy. 

Considering all those factors, insiders generally believe that it was not practical that "China's GDP will exceed that of the United States in 2016."

China has the world's largest population, so it's natural that it has a large economy. Even if China's overall GDP exceeds that of the United States in 2016, its per-capita GDP still remains small. Apart from the differences among some non-traded goods, it's difficult to measure the different quality of similar products from the two countries.  

With the changes of international power structure, people may focus on and even exaggerate the rising power of China. Therefore, the release of the report may have an implied meaning. When the IMF released the GDP figure calculated by PPP at this time, its deeper meaning might be to require a large country like China to shoulder more international responsibilities.

It's possible that China's GDP will exceed that of the United States in one or two decades. However, the high GDP does not necessarily imply stronger comprehensive national strength, not to mention China's per-capita GDP is much smaller than that of the United States. Statistics show that by 2016, China's per-capita GDP will reach about $13,720, while that of the United States will reach $57,330. 

Although China has a bright and hopeful future, we must realize that the country is now faced with various problems in economic development: a big population with a growing aging population, the widening gap between the rich and the poor, low efficiency, high unemployment rate,  and the potential bubbles in the real estate and securities markets, all of which will affect China's future economic development.