China overtook USA as the world's largest economy, measured by purchasing power (not GDP)

[alhoon]

OLD POST



http://finance.yahoo.com/news/china-...090801574.html

The gist: China just overtook USA as the world's largest economy according to IMF, but not based on GDP alone, but on purchasing power.

While that is all good and nice when we talk about people since purchasing power is all that matters to them, when we talk about countries, then I believe GDP is the way to go. While the Chinese within China have according to the IMF greater purchasing power than USA, when it comes to the national level, it's how mostly much the country makes not how much the county's people can consume.

I.e. you can't buy Western-made high-tech equipment using your own lower values, you buy stuff at the price the other nations have. You can build factories and ports etc though using your own lower prices so it's not for naught.



UPDATE:
http://finance.yahoo.com/news/offici...150936444.html

"China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S."

and

"This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade."
OK the article is a bit dramatic. But it's important that China surpassed USA in global trade never the less.

[IZob]

omg. Is this one of those "Now is the time to panic" moments?

[conon394]

Well yes Purchasing power parity is voodoo economics.

But the reality is sort of so what?

You got a billion plus people vs only what ~320,000 million and you will eventually get a larger net GDP. The per capita numbers tell a different story, anyway so I'm not going to loose sleep on this one. In any case great maybe China's currency will become the preferred reserve currency and it oligarchs might find that fun and have to be transparent in how they run their currency and than can watch a strong Yuan kill their cheap manufacturing while a weak dollar US can reindustrialize at their expense.

China rather like international dick waving even more than US congressmen but face fact China's GDP is vastly larger than Norway but quick pick a country to be born in China or Norway?

Also it worth noting that most Economists are a bit skeptical of the Data China supplies in they they look to regularly overstate growth and understate inflation for example. I had few papers on that but I have to find them

[alhoon]

Ehh... I would like to say here that personally, I don't think it's a "failure of the West" or something that China overtook the USA as 1st economy by purchasing power. Good for the Chinese doesn't mean it's bad for the West.
I'm just interested to see what others think about it and what changes (if any) such news would bring.


PS. China is communist. So capitalism isn't absolute necessity for a country's financial growth.

[Dante Von Hespburg]

Ehh... I would like to say here that personally, I don't think it's a "failure of the West" or something that China overtook the USA as 1st economy by purchasing power. Good for the Chinese doesn't mean it's bad for the West.
I'm just interested to see what others think about it and what changes (if any) such news would bring.


PS. China is communist. So capitalism isn't absolute necessity for a country's financial growth.

China's not communist my friend- China is what they themselves call 'Chinese Communism'- which basically is capitalism with a one-state autocracy thrown in who dress in Red.

Like their former comrades in Russia and Eastern Europe, the Chinese people prefer market riches to Marxist dogma. Now even the Communist Party leaders are conceding that private enterprise is here to stay.At its annual meeting, scheduled to begin today, the National People’s Congress, China’s parliament, is expected to amend article 11 of the constitution and officially recognize that privately owned enterprises are an “important part of the socialist, market economy.”
The diminishing role of state-owned enterprises, SOEs, and the raising status of non-state enterprises, including private firms, are realities that the ruling elite can no longer ignore. State enterprises account for only 30% of industrial output, but their political pull has meant that they still capture the bulk of investment resources - bureaucrats directed 70% of state bank loans to SOEs last year. With the change in the constitution, private firms hope to be able to compete on a more equal basis for scarce capital.
If the people’s congress does approve the constitutional change and recognizes “multiple forms of ownership” in addition to state ownership, the Communist Party will be admitting what the common folk already know: The future of China lies with free markets and private property.

http://www.cato.org/publications/com...ommunism-china

Not very. Since the end of the Cultural Revolution in 1976, China has all but abandoned the tenets of classical marxism, including collective ownership of the means of production. Nowadays, just about everything is at least partly privatized. Whereas the Chinese Communist Party under Chairman Mao owned every factory and farm in the nation, the economy is now a patchwork of public and private businesses. Schools can also be state-run or private. Entitlements have also been cut way back since the days of true communism, with minimal state-provided health care and social security programs. We associate socialist countries with confiscatory tax rates, but taxes aren't especially high in China. (Chinese corporations pay 25 percent and individuals between 5 and 45 percent—numbers roughly comparable to thosein the United States.)

http://www.slate.com/articles/news_a..._is_china.html

Basically China is a capitalist economy with European Socialist aspects of state ownership over some companies (or semi-ownership)- all pretending to be a communist regime. Incidentally their no welfare state either (at least not as extensive again as the European model- one perhaps could argue their more communist in ideology than modern China).

[hellheaven1987]

Basically China is a capitalist economy with European Socialist aspects of state ownership over some companies (or semi-ownership)- all pretending to be a communist regime. Incidentally their no welfare state either (at least not as extensive again as the European model- one perhaps could argue their more communist in ideology than modern China).

You know, in West that is called Fascist state.

- One party state with party control everything using police and military force.

- Constantly playing nationalist propaganda to bring out nationalism feeling.

- Economic model is State Capitalism, believe some sore of central planning economy in big direction but left small things be done privately.

- Talking about how they need to fight "corruption" and "criminal activity" (like how Mussolini fought mafia, or Hitler fought "Bolshevist" scums).

- Attempt to promote single culture by using cultural genocide.

Tell that to Chinese and they would go mad at you.

[Roma_Victrix]

Tell that to Chinese and they would go mad at you.

Unless you're Taiwanese. They're wise to all the BS that comes from the mainland.

Still, after all the vitriol and nonsense, and injustices that are propagated by the regime ruling from Beijing, I still hold out hope for the Chinese. They are a people who always think in the long term. For them I'll suspend judgment. Give them another century. In that amount of time, who knows? They could perhaps adopt the Hong Kong model of a free and open press plus democratic institutions. In the meantime, however, they are an annoying reminder of a bygone and outdated Soviet model, a wannabe at that, and entering the 21st century as one of the few countries afraid of its own shadow.

BOO! Tianenmen Square! 1989! Did I catch their attention? I hope so. So long as they're unable to even have an open dialogue and honest discussion about relatively recent events and even current events, the PRC will be a shaky, unstable, wobbly house. Time to man up. Time to be a man. Face up to what your party has done. What the matter? You afraid? Huh? Tough guy?

Pfft. You're nowhere near as tough or manly as this dude:



Let's see Xi Jinping do something like that. Puss.

[hellheaven1987]

Hong Kong

a free and open press plus democratic institutions

[Dante Von Hespburg]

Oh...
I am disappointed. So, it's "communism" not communism. And they are actually worse than us in welfare state. Well, how they deal with unemployment then?

As far as i'm aware my friend, there very much more into the capitalist 'get a job, or search for one'. Beyond the state control of full or part of certain businesses. Europe has a far more extensive and 'leftist' socialist system.

I'm afraid 'actual' communism or indeed the one's experimented with so far have never been a success, usually due to a one part system taking over completely and they becoming the new 'upper class' and those affiliated with them.

You know, in West that is called Fascist state.

- One party state with party control everything using police and military force.

- Constantly playing nationalist propaganda to bring out nationalism feeling.

- Economic model is State Capitalism, believe some sore of central planning economy in big direction but left small things be done privately.

- Talking about how they need to fight "corruption" and "criminal activity" (like how Mussolini fought mafia, or Hitler fought "Bolshevist" scums).

- Attempt to promote single culture by using cultural genocide.

Tell that to Chinese and they would go mad at you.

Well when you put it like that

This actually is a very valid point, i haven't considered that aspect. Especially with the state censorship and whitewashing of history. Well... seems fascism as a practical means of running a country is alive and well within the China model.

[chilon]

You know, in West that is called Fascist state.

- One party state with party control everything using police and military force.

- Constantly playing nationalist propaganda to bring out nationalism feeling.

- Economic model is State Capitalism, believe some sore of central planning economy in big direction but left small things be done privately.

- Talking about how they need to fight "corruption" and "criminal activity" (like how Mussolini fought mafia, or Hitler fought "Bolshevist" scums).

- Attempt to promote single culture by using cultural genocide.

Tell that to Chinese and they would go mad at you.

China pretty much is a 21st century fascist state.

Of course there are differences from old school European fascism but that outline is definitely closer to a fascist state than either to a theoretical communist or laissez-faire capitalist or even modern European socialist state.

I think you could also look at the rise of the Asia "tiger economies" (Hong Kong, Singapore, So. Korea and Taiwan) and also see shades of fascist policies during rise from late 60s to late 90s (such as the state companies integrated with private markets). It wasn't the type of oppressive fascism people tend to associate but definitely some policy similarities there for sure - although arguably much less than China on the media control front.

[alhoon]

Oh...
I am disappointed. So, it's "communism" not communism. And they are actually worse than us in welfare state. Well, how they deal with unemployment then?

[Mangalore]

What I don't get: Is it bad when other countries are as rich as you? They will be as expensive as you so their exports need to compete and they will buy tons of stuff so demands for goods get high.

The only worrisome factor is China's political system and the influence gained via economy. Would be nice if they got some work done on rule of law, representation of the people and so on, I don't even expect a western democracy, just less top down command and control and more bottom up control.

[conon394]

Pfft. You're nowhere near as tough or manly as this dude:

Dude was awesome I hope he did not meet with a nasty end

[Shambloc]

PPP only matters on the Per Capita basis, not on the National Basis.

What I mean by that is you can use PPP to determine the average purchasing power, and economic quality of life of individuals within a country. However, the world economy works on real dollars (OPEC doesn't sell oil cheaper to countries with a high PPP:Nominal ration).

[ShockBlast]

PPP should not be calculated for GDP, only as per capita, the whole point of PPP - Purchasing Power Parity - is to evidentiate the basic goods a person can buy with it`s average salary.

It`s like calculating the GDP based on the bread and butter the citizens of a country can buy but we all know that some basic goods can be subsidised thus the hole PPP GDP thing is just pointless.

PPP or nominal, no one should take PRC serious about the size of it`s GDP.
It has been shown countless time that the consumption of very basic goods needed to boost the economy - coal, gas etc. - is not there, thus the numbers reported by PRC are fiction.
Their true nominal GDP might be around 5 trillions but 10 is pure fantasy.

[alhoon]

PPP or nominal, no one should take PRC serious about the size of it`s GDP.
It has been shown countless time that the consumption of very basic goods needed to boost the economy - coal, gas etc. - is not there, thus the numbers reported by PRC are fiction.
Their true nominal GDP might be around 5 trillions but 10 is pure fantasy.

That there's evidence the consumption of coal and gas aren't as much as the economists would expect, doesn't mean that the numbers reported are fiction. Also the above report wasn't by the Chinese themselves, it was by the IMF that probably has ways and tools to figure the GDP of China way more accurately.

[Love Mountain]

That there's evidence the consumption of coal and gas aren't as much as the economists would expect, doesn't mean that the numbers reported are fiction. Also the above report wasn't by the Chinese themselves, it was by the IMF that probably has ways and tools to figure the GDP of China way more accurately.

They would still need data that the Chinese can easily falsify, and have every reason to do so...

Unless you're Taiwanese. They're wise to all the BS that comes from the mainland.

Taiwan is over-rated as a regime. They're about as good as South Korea.

BOO! Tianenmen Square! 1989! Did I catch their attention? I hope so. So long as they're unable to even have an open dialogue and honest discussion about relatively recent events and even current events, the PRC will be a shaky, unstable, wobbly house. Time to man up. Time to be a man. Face up to what your party has done. What the matter? You afraid? Huh? Tough guy?

The PRC is not an unstable house. It has an iron grip over everything and the people are repressed to the point where they can't even form a proper resistance. *cough* Western China *cough*

[Denny Crane!]

They would still need data that the Chinese can easily falsify, and have every reason to do so...



Taiwan is over-rated as a regime. They're about as good as South Korea.



The PRC is not an unstable house. It has an iron grip over everything and the people are repressed to the point where they can't even form a proper resistance. *cough* Western China *cough*

South Korea that brilliant economy and well run country, good accolade.

[Love Mountain]

South Korea that brilliant economy and well run country, good accolade.

Ah, are you referring to that military-industrial complex that spurred the rapid growth in the 20th Century? The same legacy from the Chung-Hee regime that continues to drive corruption, corporatism, and blatant nepotism in both the Government and the "Free-Market". Yes, I guess the most obvious example being that Prostitution is "illegal" in South Korea, or so they told me, as I walked through Seoul's red light districts. I'm not complaining about that tidbit but it's certainly a reflection of how one of the world's biggest economies has rampant trafficking, corruption, and cronyism. Is it nice to live in Busan or Seoul? Sure, take a ride about 200 miles out to one of the more "typical" Korean households and you'll see living standards not much better than Eastern Europe. Okay, slight hyperbole there, but not by much. Let's say Spain or Italy. Lel.

Yes, I do enjoy hearing praise about South Korea and all the comments about "progressive" President Park Geun-Hee. The only reasons I hear that in my retard Political Science 412 class is because she's a woman. She is a conservative part of the "Old Guard" of South Korea's political and corporate elite who reminds me of the Tea Party here in the states. Tax Cuts and De-regulation. Sound familiar? I'm simply apalled that Korean keep voting these tools into the office, knowing full well that they're going to get screwed over for another damn 8 years.

Brilliant economy and well-run country. Rofl. I don't think I've ever heard a bigger joke in my life.

[conon394]

That there's evidence the consumption of coal and gas aren't as much as the economists would expect, doesn't mean that the numbers reported are fiction. Also the above report wasn't by the Chinese themselves, it was by the IMF that probably has ways and tools to figure the GDP of China way more accurately.

They still have rely to great extent on self reported data - in many cases. Yes can sift through it but as even some Chines officels do but it still means that overall numbers on growth or such can only be crudely altered.

http://online.wsj.com/news/articles/...52181633939984

China is addicted to for lack a better term vanity projects and its GDP as become one - I am sure being largest economy is something its oligarchs want to have as sort of political toy for prestige (passing the US and all that).