China’s potential economic troubles

China has seen an explosion of economic growth since the government put in place major reforms in 1978, growing at an average of 10% annually.  Over the past decade, China has moved up four places in the world economic rankings, surpassing France, the U.K., Germany and Japan, and is only second to the U.S.  Currently, China accounts for a little more than 10% of the world’s economy.  By 2027, economists predict that China will overtake the U.S. as the number one economy in the entire world.   Despite the rise, the benefits of the economic expansion aren’t felt by all of the Chinese.

China’s GDP per person is $9,143 per year, which according to the International Monetary Fund is 91st in the world.  Ironically, developing countries such as Iran, Azerbaijan and Botswana are ranked higher than the economic powerhouse.  Even though China is lifting more of its citizens out of property and moving more citizens from rural areas to urban areas, it doesn’t mean that the average household in China lives like the average household in U.S.   It is estimated that 200 million Chinese citizens earn less than $2 a day, to get some perspective on this number, there are nearly 300 million people in the U.S.   If the living standards and the wages don’t increase enough to enable the Chinese to purchase the goods that they are producing, the Chinese economy will be unable to sustain its growth.