China may overtake US as biggest economy this year
Economists had not expected the change to take place until later in the decade
The construction site of the Hong Kong to Guangzhou cross-border high speed rail link terminus, West Kowloon, Hong Kong, China, Chinese economic growth is slowing after decades of double-digit percentage expansion.
With 1.4 billion people and rapid expansion from a closed society into a major industrial power, it has always been a question of when, not if, but China is poised to overtake the US as the world’s biggest economy as early as this year, according to a new reading of statistics.
Economists had not expected the change until later in the decade, and the revelation comes as Chinese economic growth is slowing after decades of double-digit percentage expansion.
“The US remained the world’s largest economy, but it was closely followed by China when measured using PPPs [purchasing power parity]. India was now the world’s third-largest economy, moving ahead of Japan, ” the report said.
The International Comparison Programme is conducted every six years and is designed to allow comparisons of living standards in countries with widely varying prices.
“The largest economies were not the richest, as shown in the ranking of GDP per capita. The middle-income economies with large economies also had large populations, setting the stage for continued growth,” it said.
China’s economy was 87 per cent of the size of that of the US in 2011, assessed according to so-called purchasing power parity, a measure of what people can actually buy, the International Comparison Programme said. This was 15 per cent bigger than previously estimated, according to the programme, which includes organisations such as the World Bank and UN. It had put the figure at 43 per cent in 2005.
Changes in methodology contributed to the speed of China’s rise and India jumping to third-biggest in 2011 from 10th in 2005.
Based on purchasing power parity, China’s gross domestic product was $13.5 trillion (€9.76 trillion) in 2011, the latest year for which data is available, compared with $7.3 trillion (€5.26 billion) when calculated using exchange rates.
Purchasing power parity does not take into account wealth per capita. On this basis, China is still considered a developing nation and ranks well behind the US.
According to World Bank figures, US GDP, which measures all goods and services produced in a country, was more than $16 trillion ($11.54 trillion) in 2012, while China’s was $8.2 trillion (€5.91 trillion).
The International Monetary Fund has forecast China’s economic growth this year at 7.5 per cent, almost triple the 2.8 per cent outlook for the US.
News of the Chinese economy’s growing global importance came as the country continued its clampdown on corruption.
Mr Li was close to Zhou Yongkang, the former domestic security chief at the heart of the extensive graft inquiry.