Is China already the world’s most dominant economy?

IN 2010, WHEN President Barack Obama welcomed his Chinese counterpart to a summit in Washington, DC, he greeted him with a handshake and a swift, shallow dip of the head. The image of America’s president bowing before China made an arresting cover photo for the book “Eclipse”, published the following year. The book, written by Arvind Subramanian of the Peterson Institute for International Economics, a Washington-based think-tank, predicted that China would soon come to dominate the world economy and that America could do precious little about it. Your correspondent once included the cover image in a presentation at the Central Party School in Beijing. It caused quite a frisson.

To gauge a country’s economic “dominance” Mr Subramanian combined its share of world trade, net capital exports and global GDP (measured at both market exchange rates and purchasing-power parities, which try to correct for international differences in the price of similar goods). He gave each attribute a weight loosely based on the IMF’s formula for allocating votes to its members. His index, he argued, successfully captured Britain’s economic hegemony in 1870, its rivalry with Germany in 1913 and its eclipse by America in the subsequent decade.