China Vs. The U.S.: A Race To The Top

By Eric Fontinelle | April 07, 2010 AAA
China Vs. The U.S.: A Race To The Top

The United States may be the most powerful country in the world, but China continues to make great strides toward becoming number one. Here are four interesting areas where China has begun to rival the United States. You'll likely notice a common thread: wherever China does not have the lead already, it has embarked on virtually unprecedented efforts to find its way to the top. (Want to invest in this emerging market? See Investing In China.)

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Internet Users and Download Speeds
The internet is a big deal in China, and users have increased astronomically. According to CNN.com, the number of internet users in China has tripled over the past three years. China now has the most internet users of any country in the world and the United States has little hope of catching up. With more than 384 million users online, China already has more internet users than the entire population of the United States.

However, the Chinese internet can be unusually slow. Part of the problem may come from the so-called "Great Firewall", which filters all internet traffic moving in and out of the nation. The other part of the problem is likely due to the tremendous user growth, which has temporarily stretched network capacity to its limits.

According to Speedtest.net, the United States currently ranks 29th in the world in average download speeds at 7.79 megabits per second (Mbps). China ranks 78th, and is still relatively far behind with average download speeds of 2.70 Mbps. (To learn about how the development of the internet contributed to the U.S. economy, see From The Printing Press To The Internet.)

Gross Domestic Product (GDP)
From 1979 to 2006, China's real GDP grew at an astonishing rate of 9.7% per year, according a report prepared by the Congressional Research Service. By contrast, the United States has grown at an average annual rate of approximately 3%, dipping into negative territory in 1990 and 1982.

The CIA World Factbook places China as the third-largest economy in the world with an estimated GDP of $8.7 trillion, as adjusted for purchasing power parity. The only two economies larger than China are the European Union, with a GDP of $14.5 trillion adjusted for purchasing power parity, and the United States with a GDP of $14.3 trillion. If the European Union is disaggregated into its member nations, then China is the second-largest economy in the world according to these figures. (To learn more about the connection between GDP and a country's well-being, see High GDP Means Economic Prosperity, Or Does It?)

Nuclear Power Plants
The United States is the largest energy consumer, while China receives the second-place honor; both of these markets have established firm commitments to expanding their nuclear programs. The United States currently has 104 nuclear reactors online providing approximately 806 million megawatt hours annually, nearly 20% of the country's energy usage. Due to the economic attractiveness of natural gas plants, however, new nuclear reactor construction has been stalled.

China currently has only 11 nuclear power plants in operation, while the majority of China's power is provided by highly polluting coal power plants. To remedy its massive pollution problem, China has embarked on an aggressive nuclear building program. The World Nuclear Association estimates that China currently has about 57 new nuclear reactors that are either under construction or planned. Further, it estimates that an additional 150 nuclear reactors are proposed for construction in the near future. (In many cases, nuclear power is a best-case environmental option. For more insight, see Forget Green Stocks, "Green" Will Do.)

High Speed Trains
Currently, China has a significant lead over the United States with approximately 4,000 miles of high-speed railways currently in operation. Further, a new Chinese economic stimulus project is set to spend an additional $300 billion to build 16,000 additional miles of high-speed railways.

U.S. high-speed rail efforts are miniscule compared with China. So far, the U.S. has allocated only $8 billion in federal spending to build new high-speed rail lines. While several states have ongoing high-speed rail initiatives, little progress has been made over the years. Currently, the only operating high-speed rail line in the United States is Amtrak's Acela Express service, which runs at an average of 68mph; Chinese trains operate at at 156 mph on average.

The Bottom Line
China has achieved an amazing pace of growth over the last three decades. Considering the scale of its current building efforts, China looks to be determined to become a full-fledged superpower. But this massive growth has not come without a price. China also has many problems left to resolve, in particular its massive pollution problems and the huge wealth disparities within its population. It will be interesting to see how well China is able to solve these problems in the coming decades, and what type of impact it will have on the world if it does indeed grow to be bigger than the United States.

If you're still feeling uninformed, check out last week's business highlights in Water Cooler Finance: Auto Hope, Bubbling Oil and Obamanomics.

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