An International Monetary Fund (IMF) report early last October revealed that China overtook the United States in 2014 to become the world's largest economy based on Purchasing Power Parity (PPP), a new economic gauge. Based on the PPP measurement, it calculated China's gross domestic product (GDP) at US$17.6 trillion, US$200 billion higher than the U.S.
Using the same calculation, it found that seven emerging economies - China, Brazil, Russia, India, Mexico, Indonesia and Mexico - also dubbed as new "G7," had surpassed the old one dominated by the most developed countries, including the United States, Britain and Japan, with a gap of US$3.3 trillion.
Despite its controversial approach, the PPP-based calculation is a moderately reasonable way to reflect the economic realities. Besides, the rapid growth of the emerging economies represented by the new "G7" is now widely accepted.
It is still too early to be optimistic, however. China's GDP lags far behind of the United States calculated purely on market exchange rates, while per capita GDP is only 15 percent of the American level. And China still doesn't rate in soft power compared to the U.S.
History shows it may take several decades or even a century for one country to surpass another. The United States did not overtake Britain as the world's top economy until the end of World War II even though swing had started half a century earlier.
Policies of reindustrialization adopted by the Barack Obama's administration have lifted the country out of the economic meltdown caused by the subprime mortgage crisis in 2008. In the coming five to eight years, the U.S. economy will keep good momentum with improved employment and breakthroughs from new inventions and techniques.
However, long-term, the United States has fewer advantages in manufacturing industries compared to China and East Asian countries.
Europe, meanwhile, has not yet recovered from economic slowdown. However, in my opinion, with impeccable infrastructures, comprehensive legal systems and great innovative abilities in sciences and technologies, Europe will revive in 10 to 20 years - on the precondition of being able to establish a highly integrated institution to ensure smooth economic running with a single currency.
However, the best momentum still belongs to the emerging economies. Advantages, such as the demographic dividend, transfer of capital, technologies and industries and the rise of China and India, will all accelerate this development.
Latin America's share of exports to the United States fell from 57.8 to 39.6 percent between 2000 and 2013, while rising from 1 percent to 9.7 percent to China. China's share of exports in reverse surged from 2 to 15.1 percent. America's slid from 48.7 to 30.7 percent.
But there are still problems troubling cooperation between China and the other developing countries. For example, the economic downturn in China has reduced its demand for resources from Latin America. Besides, raw material exports in no way benefit the development of Latin America in a long run. There is also trade protectionism.
To change this, the first ministerial meeting of the Forum of China and the Community of Latin America and Caribbean States (CELAC) opened in Beijing on January 8, 2015 aiming at consistent cooperation and sustainable development.
Experience in Latin America and Africa has shown the laisser-faire market and complete privatization may not be suitable to all. In the boom era of Argentina in the early 20th century, investors from the developed world rushed to grab cheap resources; lured by easy money, countries like Argentina, Brazil, Mexico and Peru heavily borrowed in hard currency, causing a debt crisis in the 1980s that led to a prolonged economic recession.
Comparing to Latin American countries abundant in natural resources, China has faced even more severe challenges, including the decreasing demographic dividend, graying society, sparse natural resources and deteriorating environment. Thanks to its discreet market policies, the country has fended off several possible economic crises and is still adhering to its modest development pace in the course of reform and opening up.
Due to the economic rules framed by the developed world, which are much more experienced and dexterous in market economies, China, as a newcomer, still needs to be cautious at each step it prepares to take for a change. It should be prudent in internationalizing the Chinese Yuan (RMB) and opening its financial market, ensuring slow yet steady evolution.
The author is the dean of the Emerging Markets Institute, Beijing Normal University.
The article was translated by Wu Jin. Its unabridged version was first published in Chinese
Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn.