China's Forex Reserves Reach $1 Trillion mark

China’s Forex Reserves have reached a record $1 trillion mark! That gives it a big clout in the world economy. At the rate at which it is growing every year, if it could be extrapolated in the future and nothing wrong was to happen, then China will surpass US in its contribution to the World’s GDP growth by 2025! That is a significant milestone.

There are caveats however. The Chinese growth is very strongly linked to State control. The private entrepreneurs are strong but they have not contributed as much as they should have. More importantly most of the growth is export driven and not so much fueled by local consumers.

The prediction from MorganStanley analysis report:

In his analysis for Morgan Stanley, Mr. Roach extrapolated plausible growth rates into the future for China, India, Europe, Japan, and the US. This is merely a simulation, not a formal forecast, but the results are telling: In its contribution to world GDP growth, China would surpass the US by 2025. That would be up from about 35 percent of the US contribution in 2005, and 60 percent in 2015. India’s contribution would surpass Japan’s by 2025, but remain far behind China and the US.

The World Economy will see major upheavals one way or the other. If China and India can indeed make it big then the balance would tilt. And if they do not make it to that level and collapse en route – then it will trigger an unprecendented depression!