China is not yet number one
Jeffrey Frankel 09 May 2014
Many claim that China will soon overtake the US. This column argues that this claim is based on a misuse of statistics. ICP price data is necessary to compare living standards, since a dollar’s worth of yuan buys more in China than a dollar buys in the US. But the fact that rice and clothes are cheap in rural China does not make the Chinese economy larger. What matters for size in the world economy is how much a yuan can buy on world markets. Using the correct prices, the US remains the world’s largest economic power by a substantial margin.
Widespread recent reports have trumpeted: “China to overtake US as top economic power this year.” The claim is basically wrong. The US remains the world’s largest economic power by a substantial margin.
US, China, purchasing power parity, statistics
Why have developing-country data on real incomes been revised so much?
Martin Ravallion 26 March 2010
The World Bank’s estimate of China’s real GDP per capita was revised down by 40% in 2005. This column explains how economic growth impacted price structures in developing countries -- impacts that had not been factored into how old PPPs were updated prior to new price surveys. It argues that large revisions could be avoided by using better economic models for predicting PPPs.
The International Comparison Program (ICP) collects the survey data on prices across countries that are used to estimate Purchasing Power Parity exchange rates (PPPs for short). These are then used to make international comparisons of real incomes and for other purposes, including measuring global poverty and inequality.
GDP, World Bank, data, purchasing power parity