China, world's first economy this year

Iirc, this is, ya, ppp Purchasing Parity Power or somesuch. Basically (as NPR described it) a taxi ride in China may cost about $4 for an equivalent $20 ride in the US.

So...if you divide the size of the US economy by this incredible multiple, they they are equal by the end of the year.

If you go for absolute size, it's like 2020.

If you go for extra overhead the wasteful, bloated government can freely lay its hands on and spend as it pleases, many decades if ever.
 
rjh01 said:
China's statistics are not always 100% reliable. When it can build a navy anything like the USA then it would be a super power.
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Not surprisingly, an uninformed "opinion" irrelevant to the matter and an off-topic, both linked by a non sequitur, altogether in a short paragraph.

Letting us know how you feel about it is not the kind of thoughts asked in the OP.
 
I would have to say, with others, that measuring in terms of PPP is fraught with difficulty.

A few years back it was announced that people in Taiwan are now richer in Japan. Or at least, that is true if you take into consideration that what you can buy in Taiwan is cheaper than in Japan and generally of lower quality, which apparently is great if you prefer stinky tofu to sushi.
 
PPP is what we have. How can we compare the values of a tasteful French shirt with a nasty Japanese one? Or was it the other way around? How can we compare a 2.50$ fare in New York's subway with a 0.45$ fare in Buenos Aires' underground, provided you can travel some 20 miles in NYC and 11 in BA, though strictly underground in BA but partly as an el in NY? Do their speeds and noise levels count?

PPP is designed to compare the "heftiness" of different economies, but it can't explain international trade, exchange rates or quality of life all by itself, and that's OK.

I wonder what's behind this murmuring here and there about PPP not telling what some want to hear related to this thread's title. For me the important bit is this piece of information:

"China fought for a year to undermine new data showing it is poised to usurp the US as the world’s biggest economy in 2014 based on purchasing power, according to people who helped compile the report".

The other angle is Chinese economy growing 60 times in 35 years, and what's going to become of world's economy when it doubles again in presumably 10 years, including one or more bubbles popping in the meantime.
 
timhau said:
We also have absolute numbers, but you can naturally always ignore them, if they don't tell the sort of story you want to hear.
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We also have international exchange rates, trade balances, GDP, etc. PPP far from only number we have.

That said, I have always suspected that PPP gets short shrift in these kinds of economic comparisons.

Basically, what this report tells us is that...
... IF you are living in China
... AND IF you are buying Chinese goods and services,
... THEN your renminbi will stretch further than the equivalent amount in dollars (IF you are living in the US and buying US goods and services).

Which is great news if you're poor in China, but not necessarily an indicator that China has the #1 economy when compared to other nations.

This paragraph on page 23 of the report (page 33 of the PDF linked in the OP) seems relevant:
Summary of Results and Findings of the 2011 International Comparison Program said:
Because of the sampling errors and statistical errors arising from the calculation methods, differences in real GDP of less than 5 percent should not be considered significant. This margin of error can rise to plus or minus 15 percent for economies that differ widely in their price and economic structures. This should be kept in mind when using, for example, the PPPs of the United States, China, India, and Brazil to compare the countries not only with each other but also with those of more disparate economies such as most of the African economies.
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A margin of error of +- 15%? It's a good thing we're not comparing the PPPs of the United States and China!

Oh, wait...













Never mind.
 
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aleCcowaN said:
I wonder what's behind this murmuring here and there about PPP not telling what some want to hear related to this thread's title. For me the important bit is this piece of information:

"China fought for a year to undermine new data showing it is poised to usurp the US as the world’s biggest economy in 2014 based on purchasing power, according to people who helped compile the report".
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The NPR story I heard on this hypothesized that the Chinese government has to manage the expectations of a not-fully-gruntled populace that might read and draw conclusions from this report.
 
theprestige said:
That said, I have always suspected that PPP gets short shrift in these kinds of economic comparisons.

Basically, what this report tells us is that...
... IF you are living in China
... AND IF you are buying Chinese goods and services,
... THEN your renminbi will stretch further than the equivalent amount in dollars (IF you are living in the US and buying US goods and services).

Which is great news if you're poor in China, but not necessarily an indicator that China has the #1 economy when compared to other nations.
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The whole point of GDP i to measure the value of goods and services a country is producing. What the PPP number tells you is that in real terms the Chinese economy is producing about the same amount of goods and services as the US.

A big part of why the PPP number is lower is that China keeps the value of it's currency artificially low. This is probably part of the reason China is trying to downplay this, they use the "low GDP" argument to justify their currency and trade policies and believe they would feel more pressure to compete on equal terms if they were recognized as the worlds largest economy.
 
timhau said:
We also have absolute numbers, which list the US GDP at almost twice that of China even though the latter has four times the population, but I suppose they're not interesting.
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That's not "absolute numbers" :rolleyes:, that's GDP at market prices and it's not reliable to compare the size of economies, hence PPP was created. But, hey, you can use those platform shoes if they make you feel taller on that.

The bit about the Jones having 500 grand but not having more money than the Smiths (who have 450) as the Jones are 10 in the family and the Smiths just three, well, we better avoid further analysis -the "four times population"-.

To all the "experts" who like to play by ear in the Economics, business and finance forum, why on earth does GDP at market prices account for VAT and how is that reflected in GDP PPP?
 
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theprestige said:
The NPR story I heard on this hypothesized that the Chinese government has to manage the expectations of a not-fully-gruntled populace that might read and draw conclusions from this report.
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I'm getting from that that these news are far more traumatizing to certain sectors of the US' population than what I thought it would be. If there's some consolation, for decades to come US will retain a great deal of the big bombs and the ability to destroy the world. That is real power. That "you" DO have.
 
Is this post supposed to elicit shock and denial from American / western folks? So much so that pointing out the issues with PPP and not-per-capita output is to be seized upon as incidences of shock and denial? Cool idea.
 
Gawdzilla said:
Yep, they're making all the mistakes we made, only faster.
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This is actually true, and I do wonder when their pollution is going to catch up to them. In several cities, I have to wear a particulate mask. Then there's the heavy-metals issues as well as the choices of fuel.

It will be interesting.

One thing I'm sure of. The people in the PRC like owning things, having their own property, and being able to buy and sell it, and that, ladies and gentlemen, will be extremely hard to back out of the "new" system. And by 'extremely hard' I don't think it's possible at this point.

As to purchasing power, we are totally, horribly screwed in comparison to China at the minute, and it's only going to get worse with all of our capital being offshored as manufacturer after manufacturer is plundered and closed.
 
aleCcowaN said:
Mainland China finally reached the top. Thoughts?

Summary of Results and Findings of the 2011 International Comparison Program - The World Bank

Since 2011, Chinese economy has grown some 24% while US' just some 7% -this includes 2014 forecasts-, ergo the title.
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I think it's absolutely great that such a large fraction of the world population has raised it's living standard above abject poverty. That's wonderful.

On a per capita basis I believe China is still far behind Mexico. Yes they are doing a lot of good things, but population size is not an advantage - it's a liability too.

It's relatively easy to grow 24% when you are the worlds cheapest labor supply. That sort of advantage doesn't last; as the std of living rises, so does the cost. Companies are already looking outside of China for manufacturing. IOW I expect their growth rate to slow. Hopefully they can create internal markets and bring economic advances broadly - outside of city dwellers of Eastern China. I wish them well on that.
 
Interesting. This is sooner than I expected.

For those interested:
List of countries by GDP (PPP)
List of countries by GDP (nominal)

Which measure is "truer" though? If you are going by currency exchange rates set by the market, it's nominal. However, It seems like there are also good reasons to consider the PPP basis. And is China's currency actually undervalued due to government manipulation? For many years, this was the accusation.
 
Puppycow said:
List of countries by GDP (PPP)
List of countries by GDP (nominal)

Which measure is "truer" though?
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There is no competition. I think I'll have to repeat this many times along this thread, and not because it wasn't crystal clear from the very beginning: PPP was created because market prices -nominal- fails to this purpose. And PPP doesn't come from a school of economics or an ideology: it's international standard. And those data don't come from China motu proprio, but from an international panel who review the data and how they are generated. That's why the report has no data on destabilized countries, like Afghanistan; countries in internal turmoil, like Syria; countries that reject any kind of audit, like Cuba; and countries known to disguise their statistics or hinder the audit process, like Argentina. But the report does have data about a country with half a dozen prices for the dollar -ranging from 6 to 32 to one- which also officially hates the ideology that generates the report: Venezuela.
 
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