Bob,

I appreciate your comment. There has been quite a bit of this type of “prediction” recently especially from the doom-sayers school of economics who seem to believe that there is an economic war going on between the US and the PRC. It’s funny I don’t remember anything at all about this with reference to the economy of the former USSR. Right up until the last days of the USSR one saw nary a drop of official wisdom about the collapse of the Soviet economy. Goldman-Sachs and Morgan-Stanley are predicting the toppling of the USA from the pedestal labeled “World’s Largest Economy” in a similar time frame to me. I’m sure that you’re right, by the way, in that 2020 may be too early, but the Chinese are determined to get us off that pedestal within the next generation. What they cannot do is to get us off of the wealthiest nation per capita pedestal in any near term. We seem ourselves however to be trying to make sure that ultimately happens also with Washington’s “let’s make beggars of them all, so they’ll be easier to control” drive underway.
China has a vast oversupply not only of rare earth mines, but, more importantly, of rare earth processing and fabricating. In our myopic part of the world we talk endless nonsense about what is essentially adding more capacity to an oversupplied world. The Chinese are confused. They have too much capacity and even so need heavy rare earth feed stocks. They might bend politically if someone proposed that they toll foreign sourced feeds tock and agree that it will be done either in a duty free zone or will be treated based on its ownership with the right to dispose of it by the original vendor. Its worth a try, but I haven’t yet seen this proposal made.

Thanks again

Jack

‘You wrote “we will surely see by 2020 at the latest, the return of China to its former place as the nation with the highest GDP”. Using 2012 nominal GDP figures of USD15.68 trillion for U.S. and USD8.23 trillion for China, in order for China to overtake the U.S. by 2020 would require 8.1% higher compounded average growth rate for China vs. U.S. (technically the ratio of GDP growth per year between China and U.S. needs to have a geometric average of at least 1.081). If the U.S. manages a 2% growth rate, then China would need 10.2%. Even if the U.S. had zero nominal growth rate, China would still need 8.1%, which exceeds its current growth rate. Therefore I find your proposition, while not impossible, rather dubious.’