A new survey from Pew Research says more Americans now view China as the world’s top economic power over the U.S., 41% to 40%. And a majority of survey responders in Germany (62%), Britain (58%), France (57%) and Spain (57%) say China is the world’s top economic power. Pew found a median 42% in 21 nations say China is the top economic power, versus 36% saying it’s the U.S.
It’s the perception, not the reality, that often matters.

And because China says it has been growing at such a torrid rate for years, it’s captured the imagination of many around the world that it is a burgeoning superpower. China passed Germany as the biggest exporter in 2009 and has overtaken Japan as the world's second-biggest economy. But just listen to the Chinese themselves.
A full 48% of people in China told Pew Research in this same survey they feel the U.S. is the top economic power, versus 29% saying it’s China.  if the United States regains its GDP growth rate at about 2.5% -- not happening just yet -- and China slows to 6.5%, which is where it’s headed, then the United States will contribute 23% of global growth in 2012, outstripping China’s 18% share.
But China has been notorious at faking its government statistics. Which is why for years, the smart China watchers like to compare actual electricity usage and freight traffic to China’s reported data showing an economic miracle.
Even China advocate and investor Jim Rogers doesn’t trust China's government's numbers on growth.
China’s debt-to-GDP ratio is 89%, says Beijing-based research firm Dragonomics. That’s still worse than the United States’ ratio at 79% by 2015, though the U.S. ratio here is eroding. Stephen Green, an economist specializing in China at Standard Chartered Bank, has also already estimated that China’s total debt to GDP ratio is in line with what Dragonomics figures show.
But China’s debt picture is worse than insolvent Portugal, which is 83% of GDP.
Also, the credit rating agency S&P has China’s debt rating stuck at AA-, the fourth highest level, due to its sizable contingent liabilities in its banking system. An estimated one quarter of the building projects in China have reported no revenue since 2007.
Local government debt is thought to have trebled to a quarter of China’s GDP, much of it stuck in off-balance sheet vehicles. And Moody’s Investors Service has reported that China likely understated its local government debt by $540 billion last year, bigger than its state auditor has estimated.
But China has a growing 160 million in the middle class, a number second only to the US. Still, they represent less than one out of eight of the Chinese population.
And China is relatively poor when measured by income per person, at $4,500 versus the $47,000 per capita in the U.S., among the richest. China’s biggest competitive edge is its cheap labor, but workers are demanding higher wages as the population ages.

Still, U.S. median annual income grew by an anemic 2% between 1990 and 2010, and that’s not good. And China owns an estimated $1.16 trillion in U.S. debt. China prints yuan to hold down its value so as to keep its exports dirt cheap. It then uses that extra printed currency to buy U.S. debt.
The United States is the global center for the auto, computer, finance, aerospace and other industries, data show.
The China vs. U.S. economic superpower story is really about whether the dollar will still be the world’s reserve currency.
UBS already has this to say about why the dollar will continue to keep its reserve status in the world markets:
* US Treasury market’s depth and liquidity was why it was one of the few, large financial markets to function smoothly during the global financial crisis of 2008. Even throughout the debt ceiling crisis, the downgrade crisis, and now the eurozone crisis, U.S. ten-year yields remain at historic lows, around 1.6%, levels not seen since the U.S. government capped yields after World War II to deal with economic recovery.
*Foreign currency markets are illiquid, unstable or not transparent to accommodate central bank reserve flows.
*The eurozone’s problems have kept the euro on dubious footing, with the European Central Bank shouldering the burden of keeping it strong by raising interest rates. Japan’s massive debts, the largest in the world, have kept the yen on unsound footing. Swiss debt markets are tiny.
*The Chinese government’s tight, protectionist capital controls hinder inflows to the renminbi.
*The U.S. has solid political relations with most of the planet’s largest foreign reserve-holding countries. That keeps the dollar on sound footing, too. Those countries are Japan, South Korea, Saudi Arabia, Kuwait, Qatar and the United Arab Emirates.
*Overall, a strong U.S. defense gives these countries shelter, making it in their interests to protect the dollar, and their own holdings, in the global currency markets.
*The U.S. has flexible monetary policy: True, this upsets monetary hard-liners who detest the fact that the Federal Reserve’s quantitative easing policies have blown out its balance sheet to a seventh of the U.S. economy.

*But the U.S. central bank for now can still set monetary policy independently, unlike central banks overseas. (It’s increasingly being drawn into political fights, however.)
*However, individual eurozone countries can’t do much on their own to alter the course of the euro to support their own economies, and they can’t set interest rates or pursue separate exchange rate policies to support their economies.