China To Overtake US As World’s Largest Economy This Year: World Bank
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The Chinese economy is on track to replace the U.S. as the world’s largest economy – measured by purchasing power parity (PPP) – by the end of this year, according to a World Bank report on Wednesday.
The latest estimate, compiled by the International Comparison Program hosted by the World Bank, found that China’s economy (based on PPP) was 87 percent the size of the United States’ in 2011, 15 percent larger than previously thought – and nearly the double the size of the last calculations from 2005.
The Chinese economy is on track to replace the U.S. as the world’s largest economy – measured by purchasing power parity (PPP) – by the end of this year, according to a World Bank report on Wednesday.
The latest estimate, compiled by the International Comparison Program hosted by the World Bank, found that China’s economy (based on PPP) was 87 percent the size of the United States’ in 2011, 15 percent larger than previously thought – and nearly the double the size of the last calculations from 2005.
The International Comparison Program said that the purchasing power of China’s currency, the yuan, was also much stronger than what was being reflected by exchange rates, resulting in the change of calculation to economic size.
For 2011, “the U.S. remained the world’s largest economy, but it was closely followed by China when measured using PPPs,” said the report.
With the IMF expecting China’s economy to have grown 24 percent between 2011 and 2014 while the US is expected to expand only 7.6 percent, China’s GDP (PPP) will overtake the US this year, the report concluded.
But while China is expected to surpass the U.S. in purchasing power terms this year, the economy will still be about 60 percent the size of the U.S. economy at market exchange rates.
The results are a good tool for understanding living conditions for Chinese families but other uses are limited, told Mark Williams, chief Asia economist for Capital Economics, to the Associated Press.
“It does bring home the sheer size of the Chinese economy, in the services and goods and that people in China are producing,” Williams said. But, “where it falls short is that it doesn’t really tell us about China’s economic standing relative to the rest of the world.”
“When it comes to China’s purchasing power abroad, we need to look at the figures adjusted for market exchange rates,” he added.
JPMorgan Chase & Co. director of global economic coordination in New York, David Hensley, also said that his bank preferred to use market exchange rates for its “hard-nosed business cycle analysis.”
Although JPMorgan keeps an eye on PPP comparisons as a secondary measure, using market exchange rates “gives a better sense of the resources that a country has command over,” he told Bloomberg.
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Surprisingly, even the Chinese government is trying to downplay the findings of the World Bank report.
China’s National Bureau of Statistics, which took part in the World Bank study, eventually rejected its conclusion, according to AP.
The statistics bureau “expressed reservations” about the study’s methodology and “did not agree to publish the headline results for China,” the report said.
China’s government has been reluctant to acknowledge previous milestones showing its economic rise when it passed Germany as the biggest exporter, Japan as the No. 2 economy and the United States as the biggest trader.
Its leaders have emphasized China’s status as a middle-income country in resisting pressure to adopt binding limits on greenhouse gas emissions.
