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Guest Post: China’s Economy: #1 or #126?

Tyler Durden's picture




 

Submitted by Kurt Brouwer of Fundmastery

China’s economy: #1 or #126?

There have been plenty of reports that China’s economy is overtaking
the U.S. economy and that it may soon outstrip the U.S..  As an example,
in a recent piece, my MarketWatch.com colleague Brett Arends, reported
on a study by the International Monetary Fund on the size of China’s
economy.  The IMF study suggested that by one economic measure China’s
economy would look almost as big as the U.S. economy in a few years.  Of
course, that set off my innate skepticism so I did a little digging.  
In this post, my goal is to cover two questions:

  • How big is China’s economy compared to ours?
  • And, is it really going to surpass our economy in size any time soon

To get started, check out the opening from the Marketwatch report:

The International Monetary Fund has just dropped a bombshell, and nobody noticed.

For the first time, the international organization has set a date for
the moment when the “Age of America” will end and the U.S. economy will
be overtaken by that of China.

And it’s a lot closer than you may think.

According to the latest IMF official forecasts, China’s economy will
surpass that of America in real terms in 2016 — just five years from
now.

Yikes.  Sounds pretty scary doesn’t it? Some folks might find a
report like this disconcerting because they want the U.S. to be the #1
economic power.  I don’t really care one way or the other about our
economy being #1 or #2 in the world.  Size has both advantages and
disadvantages.

But, if that concerns you, don’t worry. Despite the gloomy reports, the U.S. is likely to  remain the world’s largest national
economic power for many years to come.  And, if we would stop wearing
wearing cement shoes while running against competitors in lightweight
Nikes, it wouldn’t even be close, but that’s a story for a different
day.

A trillion here; a trillion there

To do my own research, I went to one of my favorite sources, the CIA
World Factbook.  I’ve used it many times before and I have more
confidence in the FActbook’s data than most sources.  According to the
Factbook, in terms of comparing Gross Domestic Product (GDP) straight
up, we’re #2 at $14.62 trillion and China is a distant #3 at $5.75
trillion.  Japan is close to China at $5.39 trillion. We would be #1,
but when the European Union is viewed as a single entity, it is at
$15.95 trillion. Viewing the European Union as a single, unified entity
is a bit of a stretch, but let’s not quibble.

We’re #2 and China is a distant #3

So, if we are north of $14 trillion and China is a bit over $5
trillion, how the heck can the IMF legitimately claim that China is
catching up and may even be on its way to #1 in a few years?  Well,
without massaging the numbers a lot, they cannot.

A straight up comparison shows China is far behind us.  However, the
IMF report used an alternative way to measure economic output called
purchasing power parity (PPP).

Purchasing power parity: what the heck is that?

Purchasing power parity (PPP) attempts to compare economies that have
very different price levels for basic goods and services. The most
famous example of using PPP is the Big Mac Index which is described by the Economist this way:

…[the Big Mac Index] is based on one of the oldest
concepts in international economics, purchasing power parity (PPP), the
notion that a dollar, say, should buy the same amount in all
countries. In the long run, argue ppp fans, currencies should move
towards the exchange rate, which equalises the prices of an identical
basket of goods and services in each country. In this case, the basket
is a McDonalds’ Big Mac, which is produced in more than 100
countries. The Big Mac PPP is the exchange rate that would leave
hamburgers costing the same in the United States as elsewhere…

This chart from the CIA World Factbook shows the world’s economic
powerhouses in terms of GDP, as adjusted for purchasing power parity. 
According to this, the EU is #1, the U.S. is a close #2 and China is
still #3.  This data is from 2010.

Source: CIA World Factbook

PPP tries to look at economic output across countries by leveling
the playing field. In China personal incomes are lower, but the cost
of rent or food is also lower, so by using PPP, you can perform a useful
comparison of economic output between the two countries.  Another
aspect of PPP is that it helps compare economies adjusting for currency
disparities.  Even the CIA World Factbook suggests that currency
differences need to be accounted for to compare our two economies.  I
agree.

In GDP per person, China ranks…

A further way to look at economic output is to divide GDP by the
number of people in a country.  This is GDP per capita.  It takes the
same data used in the chart above, which is GDP adjusted for purchasing
power parity, but divides that number by population. So, for China we
have to divide by more than 1.3 billion people.  For the U.S., we have
to divide by a bit over 300 million.

Here are the top 10 countries for GDP per person:

Source: CIA World Factbook

As you can see, the top 10 countries for GDP per capita are very
small nations that are either oil producers or financial centers.  The
only large country is the U.S., with a GDP per person of $47,400.  What
about China?  Well, it’s nowhere to be seen on this top 10 list.  Would
you like to guess at where China stacks up by this comparison, I gave
you a hint in the title of this post.

China is #126 is in GDP per capita:

For GDP per capita, China ranks between two economic powerhouses —
Turkmenistan and Albania.  And, remember, for this ranking, we are using
the PPP adjusted GDP so this is favorable to China compared to the
U.S.  In other words, China has a big economy overall, but it has a very
low ranking when you adjust for population:

Source: CIA World Factbook

Does this mean China’s economy is bad?  No, of course not.   China
has come a long way since its leaders adopted limited free market
reforms back in the late 1970s.  Nonetheless, it is also clear that much
of China’s large economic impact in the world is a function of the size
of its population.

China is not #1 on any economic ranking

Even with a generous methodology such as PPP, the highest China gets
is #3.  And, adjusted for economic output per person, it is #126 and
that’s not exactly something you crow about.  At a per capita GDP of
$7,400 China is a long, long way from the $47,400 we have in the U.S. 
In fact, I’ll make a prediction. China will not come close to our per
capita GDP.  Not next year or even 10 years from now.

In terms of overall economic output, China would have to grow at a
very high rate for many years to catch up to the EU or to the U.S.  I
hope it does keep growing because that is good.  And, China has vastly
improved its economy over the past few decades, particularly in terms of
export industries.  I’m not trying to knock those accomplishments at
all.  However, the idea that it is an economic power comparable to the
U.S. is clearly not accurate.

 

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Mon, 05/02/2011 - 13:21 | 1230492 disabledvet
disabledvet's picture

my favorite book from the 90's:  "Less Than Zero."  I don't know what that means but "i feel a Big Buddha comin'."

Mon, 05/02/2011 - 13:57 | 1230715 LFMayor
LFMayor's picture

is it based off the film of the same name?  You know, the one where Robert Downey Jr. was method acting?

Tue, 05/03/2011 - 01:23 | 1232980 flavian
flavian's picture

Half of the US so-called GDP is made up by "services" and especially financial services. Now, on the production side, half of that is military stuff.

Now wonder that China produces more real stuff than US and most of the products you buy from the supermarket is made in China.

 

 

Mon, 05/02/2011 - 14:06 | 1230769 covert
covert's picture

for china to become #1, it first become even more Libertian than all other countries. not likely to happen.

http://covert2.wordpress.com

 

Mon, 05/02/2011 - 13:19 | 1230496 tmosley
tmosley's picture

Uh-huh.  And what happens when the Yuan appreciates 50%?  100%?  200%?

Blammo.

Mon, 05/02/2011 - 13:53 | 1230689 Harlequin001
Harlequin001's picture

they print more of it and the exchange rate stays the same...

Mon, 05/02/2011 - 19:07 | 1232115 Nobody special
Nobody special's picture

The author is an idiot.  Not only does the Yuan have the means to appreciate, it has the headroom.  The total economy in China would be larger than the US if each person had only 20% of the buying power a US citizen has.  As China grows, it could overtake the US by a factor of five.  Now I don't believe that the world's resources can sustain that, but I do believe we will get closer to a per capita GDP balance than we are today.  Little growth is actually required for the US position to be challenged by China.

 

When Britain was losing power to the US, what do you think British newspapers were printing?  Here's a hint... they weren't promoting their demise.  They only acknowledged it LONG AFTER it happened.  And so shall it be in the US.

 

Mon, 05/02/2011 - 13:23 | 1230498 Ray1968
Ray1968's picture

European Union is not a country... its a continent. 

If you get to lump all of Europe together then we should include Canada's GDP with ours.

Mon, 05/02/2011 - 13:23 | 1230520 tmosley
tmosley's picture

But then we'd have to take Mexico's too.

And they have a monetary, and something resembling a political union--we do not.

Mon, 05/02/2011 - 13:51 | 1230694 Harlequin001
Harlequin001's picture

absolutely...

Mon, 05/02/2011 - 13:59 | 1230728 Trying to Understand
Trying to Understand's picture

http://www.whitehouse.gov/the-press-office/2011/02/04/joint-statement-pr...

http://www.oas.org/en/

I beg to differ, we do, but mass media has not told anyone about it yet.

Mon, 05/02/2011 - 15:44 | 1231219 edotabin
edotabin's picture

The media didn't tell anyone for about 60+ years........

Look at the date the US signed......

http://www.oas.org/dil/treaties_A-41_Charter_of_the_Organization_of_Amer...

Mon, 05/02/2011 - 13:23 | 1230523 falak pema
falak pema's picture

a continent that doesn't know if its lost or found...Should consult the lost & found in one year to know whats what!

Mon, 05/02/2011 - 13:25 | 1230534 trav7777
trav7777's picture

it's one currency zone, however

Mon, 05/02/2011 - 13:33 | 1230567 faustian bargain
faustian bargain's picture

Just think, if the NWO folks get their way, that list will only have one member on it.

Mon, 05/02/2011 - 17:31 | 1231760 Mallenet
Mallenet's picture

Actually - NO! There are 27 EU member states, 15 States use the Euro (which I suspect you are refering to), the rest use their own currencies.  Of course, there is also the one huge anomally - Montenegro (650,000 people), which is not in the EU but uses the Euro as its currency.

I do wish people would learn how to read before they learn how to write!

Mon, 05/02/2011 - 21:21 | 1232483 XPolemic
XPolemic's picture

+1

Mon, 05/02/2011 - 14:22 | 1230856 kaiten
kaiten's picture

European Union is not a continent, actually. It´s a political union of 27 european countries, while Europe, the continent, has 50 countries. There are (still) more than 20 european countries outside of the EU.

Europe:

http://en.wikipedia.org/wiki/File:Europe_%28orthographic_projection%29.svg

European Union:

http://en.wikipedia.org/wiki/File:EU_Globe_No_Borders.svg

Mon, 05/02/2011 - 15:53 | 1231269 TK7936
TK7936's picture

The EU is a united economy and not a continent. The Continent is called Europe and the EU does not cover all continental countries. Just for some facts here...

Mon, 05/02/2011 - 17:26 | 1231729 Mallenet
Mallenet's picture

Is it really bliss?  Ignorance, I mean?!

Mon, 05/02/2011 - 13:23 | 1230505 TheGreatPonzi
TheGreatPonzi's picture

I don't understand the point of this article. I think everybody on Zerohedge already knows the GDP and GDP per capita figures of China. 

This "my dick is bigger than yours" contest is becoming quite annoying.

By the way, the IMF is probably right, if you take into account the fact that the US are dead since the 1960s, and have simply postponed their ruin via fractional banking pyramids and accounting frauds. 

Mon, 05/02/2011 - 13:53 | 1230702 Harlequin001
Harlequin001's picture

Very true, if we simply inflate prices by 5% by printing more money has our economy 'grown'?

Mon, 05/02/2011 - 13:24 | 1230511 schizo321437
schizo321437's picture

Britain probably did similar maths when the US overtook it.

 

Keep resting on your laurels.

Mon, 05/02/2011 - 13:26 | 1230540 falak pema
falak pema's picture

britain will be the new continent of virtual money ...when the City is declared Atlantis...before it sinks...

Mon, 05/02/2011 - 13:32 | 1230560 TheGreatPonzi
TheGreatPonzi's picture

The author of the article claims he doesn't care if the US are number 1 or not, but he clearly does, as he uses "we" to describe the US economy. 

By the way, it shouldn't be a surprise that a country with a 200-years history of free market is - for now - the leader in GDP per capita, compared with a country which just got out of communism 20 years ago. What matters is not the nominal figures, but the pace of organic growth. 

Mon, 05/02/2011 - 21:30 | 1232513 Mec-sick-o
Mec-sick-o's picture

Rome did it.

Mon, 05/02/2011 - 13:27 | 1230531 kito
kito's picture

 their "per capital gdp" is irrelevant when discussing their massive economy. they have 1.3 BILLION people!! thats four times the size of our population. and they are in the process of urbanizing 250 million people who live in the sticks. they will be well beyond us soon enough.

Mon, 05/02/2011 - 13:28 | 1230538 trav7777
trav7777's picture

isn't enough oil supply for them to do that

Mon, 05/02/2011 - 13:29 | 1230562 faustian bargain
faustian bargain's picture

well, not us and them at the same time, anyway.

Mon, 05/02/2011 - 13:40 | 1230619 hedgeless_horseman
hedgeless_horseman's picture

Urbanization is probably better than suburbanization, which is what we are stuck with in the USA, as we all slide down the backside of the oil production curve.

Mon, 05/02/2011 - 13:50 | 1230661 tmosley
tmosley's picture

Not enough oil, but plenty of energy--especially when you don't give a damn about the environmental effects.

Mon, 05/02/2011 - 14:26 | 1230880 css1971
css1971's picture

Well that all depends whether they have it, or if you have it. No?

Mon, 05/02/2011 - 13:26 | 1230539 Tense INDIAN
Tense INDIAN's picture

downtrend almost OVER?::

http://markettechnicals-jonak.blogspot.com/

 

Mon, 05/02/2011 - 13:29 | 1230544 critical_mass_soon
critical_mass_soon's picture

Well you paint a pretty picture for the western nations, but you forget the chinese are very selfless people they operate like the borg, like a collective,i've seen it with my own eyes, a whole family parents, uncles aunts nephews nieces (people who have money) all pay for the next child to go to university. they know together they can acheive alot. and so the whole argument for per capita gets blown straight out of the water. only selfish americans and brits think about how much wealth they can amass regardless of how his own brother is getting by.

Its harsh but its reality.

Mon, 05/02/2011 - 13:57 | 1230733 Harlequin001
Harlequin001's picture

It's to do with credit and your history of being developed from a debt based English system. Take away the credit and that's what you have, a system where money is hard to come by, and so families are forced to operate as a unit.

Without credit, could your children afford to move out and buy a house in their early twenties?

Mon, 05/02/2011 - 13:28 | 1230552 faustian bargain
faustian bargain's picture

He does know where Nikes are manufactured, does he not?

Mon, 05/02/2011 - 13:31 | 1230575 falak pema
falak pema's picture

Well maybe the chinese will develop the energy worm like they did the silk worm five thousand years ago. A worm to out worm all fossil fuels and out ant all chinese ants relegated to leisurely life riding energy worms to opium dens for a daily massage parlor of people's hopium. 

Mon, 05/02/2011 - 13:34 | 1230591 Creed
Creed's picture

Tariffs are coming, US domestic manufacturing rebound draweth nigh.

 

Book it. 

 

Thanks for the info TD & Kurt.

Mon, 05/02/2011 - 13:47 | 1230639 LawsofPhysics
LawsofPhysics's picture

So is the next world war.  Could you be a little more specific regarding the timeline?

 

Also let me know just exactly who we are selling all of our products too?

Mon, 05/02/2011 - 13:49 | 1230675 tmosley
tmosley's picture

You're going to need a lot of scissors to cut through the red tape we have accumulated over the last 40 years.

Tariffs aren't going to do anything to get rid of those.  

Mon, 05/02/2011 - 14:51 | 1230976 falak pema
falak pema's picture

that's what the boss of WTO says : Doha round dead! All jump from the global boat...next stop the iceberg of protectionism!

Mon, 05/02/2011 - 13:40 | 1230617 TriggerFinger
TriggerFinger's picture

makes me want to go out and get a Happy Meal

Mon, 05/02/2011 - 13:43 | 1230621 Leraconteur
Leraconteur's picture

Kurt;

 

PPP actually UNDER estimates the real Chinese economy. You may as well double or triple the figures you see in raw, nominal GDP for China as they do everything on such razor-thin, cut-throat margins, and do it for far cheaper. Chinese per capita PPP is currrently about $7,400 but if you look out the window of ANY Tier 3 or up city in China what you see is a country with a $15,000 PPP per cap GDP.

 

Comparing China to Mexico, China is obviously more well off when one looks out the window walking around the nation, yet Mexico's PPP is twice that of China's.

Mon, 05/02/2011 - 13:48 | 1230647 LawsofPhysics
LawsofPhysics's picture

I was waiting for someone to point that out.  More proof the good old U.S. is quickly becoming a third world country.

Mon, 05/02/2011 - 14:28 | 1230681 topcallingtroll
topcallingtroll's picture

Still it is a small minority that live in those cities.

Arent there 600 million peasants still squatting over holes in the ground to take a dump?

Mon, 05/02/2011 - 16:01 | 1231321 RichardENixon
RichardENixon's picture

They actually have a holes to squat over? Such opulence.

Mon, 05/02/2011 - 16:09 | 1231357 thefedisscam
thefedisscam's picture

That makes 700 Million + live in urban areas, MORE THAN TWICE As MUCH as the U.S. TOTAL population!!

Mon, 05/02/2011 - 18:15 | 1231959 Leraconteur
Leraconteur's picture

I live in rural China.

They squat over a trench toilet in a public facility that has an auto timer with a motion sensor that flushes the trench every so often. Then they grab their mobile phone, hop on to their bicycle, e-bike, car or in the rare instance pull their cart of recycled cardboard, and then go on about their business.

They live in houses or apartments or a large compound with many rooms arrayed around a central courtyard. Usually small villages or towns or near (1 to 5 km) to Tier 4 cities of 40,000 or fewer inhabitants.

They save about 40% of their income so that slackers in California can have 151 weeks of funemployment, sitting at home all day surfing the net, playing X-box, and ordering pizza.

Like most of the planet, what you 'know' about China is wrong and outdated. To be fair, things change here on a yearly basis so it is a challenge to keep up.

Mon, 05/02/2011 - 13:47 | 1230657 topcallingtroll
topcallingtroll's picture

Yeah south americans look rich in comparison and dont have to eat bugs and rats, but china did send them the poison toothpaste that killed about a hundred. Maybe they were jealous of south americas lavish lifestyle, getting to eat decent meat for example.

Do we so quickly forget who we are dealing with? Plastic rice, anyone? Poison toys? Poison milk?

Mon, 05/02/2011 - 13:56 | 1230705 Urban Redneck
Urban Redneck's picture

The final sentence sinks the entire article-

"However, the idea that it is an economic power comparable to the U.S. is clearly not accurate"

Per capita statistics have nothing to with economic power, unless the author is suggesting Qatar, Lichtenstein, Luxembourg, Bermuda, et al. are comparable economic powers to the US. 

Incidentally, in terms of functioning industries that produce the GDP to be divided per capita- the US is rapidly turning financial center centric, just like Lichtenstein, Luxembourg, and Bermuda but with the same impoverished masses found in China.

Mon, 05/02/2011 - 14:04 | 1230773 schizo321437
schizo321437's picture

Sounds like a choice between junk paper, and just...junk.

Mon, 05/02/2011 - 14:08 | 1230791 Stuck on Zero
Stuck on Zero's picture

What BS.  China, by any measure, has a larger economy than the U.S.  China produces 3.5 billion tons of coal and 650 million tons of steel per year versus 1 billion tons of coal and 75 million tons of steel.  And the list goes on with every industrial commodity.  Where does our huge GDP come from?  A burger flipper in the United States earns $80-100/day and another $25 a day in benefits.  In China that same noodle flipper would earn $4/day. Does that mean our burger flipper contributes that much more? 

I invite anyone to visit Shanghai and then any city in the U.S. and claim we don't look like an economic backwater.

Mon, 05/02/2011 - 14:22 | 1230844 TheGreatPonzi
TheGreatPonzi's picture

The US and the UK live off their accumulated capital from the past and their perceived credibility. But I'd venture to say 95% of today's US GDP is fictitious, as it lays directly and indirectly upon fractional banking pyramids and exterior debt. 

To simplify, the US and the UK are currently borrowing real goods from the second-world (China, Taiwan, the Maghreb, etc.) from the future. The scheme will stop, and >80% of the West wealth will be annihilated, when IOUs from the West will cease to be accepted, either because of default or sufficiently high currency devaluation. 

What will stay in fine is a broke country, which manufactures nothing, and which cannot import anything, because its currency doesn't have any value anymore. 

Mon, 05/02/2011 - 16:02 | 1231328 RichardENixon
RichardENixon's picture

Now you're just nitpicking.

Mon, 05/02/2011 - 14:19 | 1230864 css1971
css1971's picture

No, you don't get it. The numbers are MUCH bigger in America.

 

Mon, 05/02/2011 - 14:25 | 1230889 buzzsaw99
buzzsaw99's picture

Funny. I'll pass.

Mon, 05/02/2011 - 14:27 | 1230898 topcallingtroll
topcallingtroll's picture

Yeah i dont want cancer or asthma either.

Mon, 05/02/2011 - 16:14 | 1231373 thefedisscam
thefedisscam's picture

In case you do NOT realize, the U.S. still have a MUCH HIGHER cancer prevelence rate than China does!!

Mon, 05/02/2011 - 14:55 | 1230989 nufio
nufio's picture

I second this.

The US is mostly/totally a service economy. The same services cost 1/10th in China. This doesnt mean that the services in US provide more value. I think the only industries that remain are hitech, pharma and defence. hitech and pharma are moving out at a rapid pace because the high school graduates here cant do basic math. Finally the only industry that will remain will be defence, and only because they will be prevented from moving out of the country.

 

 

Mon, 05/02/2011 - 15:16 | 1231095 Dr. Acula
Dr. Acula's picture

>the high school graduates here cant do basic math.

That's what happens when you stuff every kind of child into the same socialist concentration camp, controlled by bureaucrats who are immune to market disciplines.

 

Mon, 05/02/2011 - 16:37 | 1231491 UninterestedObserver
UninterestedObserver's picture

We export over 2 Trillion a year worth of goods.

Mon, 05/02/2011 - 15:19 | 1231063 Dr. Acula
Dr. Acula's picture

>China, by any measure, has a larger economy than the U.S.

Not at all. In terms of soybeans produced, US is superior. And in terms of draedels produced, probably Israel that is the largest economy. I'm not sure what method you are using to measure, but I'm 100% sure it is entirely subjective.

>Does that mean our burger flipper contributes that much more? 

He commands a greater income because he serves wealthier patrons. The objective exchange value imputed by the market to his labors is greater. If you pay for his burger manufacturing then it shows you do indeed value his contribution; otherwise, you wouldn't have paid for it. And if you are a vegetarian, his contribution is of no value no matter what his wage.

Marx's labor theory of value has been fully discredited. If a burger flipper lived on the moon his contributions would be for naught, no matter how skilled he is. The value is not inherent in the labor, but rather in the minds of those who receive the service.

>I invite anyone to visit Shanghai and then any city in the U.S. and claim we don't look like an economic backwater.

Again, it's your subjective observation.

 

Mon, 05/02/2011 - 16:40 | 1231509 nufio
nufio's picture

The argument makes sense to me. However when a significant chunk of the GDP is contributed to by a high value in the burger flipping/retail sales services, when the income of the population that this service economy depends on goes down the effect is magnified in decline of the gdp.

If you separate out products and services and comparing the GDP it makes for a totally different comparison.

I also suspect that in most of the products sold in the west, there is a significant margin  that is basically a "marketing tax" this value is mostly hollow and when resources are tight will see rapid depreciation bringing downt the GDP with it.

 

It would be useful to have an excel like http://www.census.gov/compendia/statab/2011/tables/11s0671.xls for china.

Tue, 05/03/2011 - 05:00 | 1233135 falak pema
falak pema's picture

"Marx's labor theory of value has been fully discredited..."

This statement defies economic logic. The whole purpose of globalisation was to use the 'international labor arbitrage' mechanism to make huge profits for the US oligarchy. It has worked to their benefit and to the detriment of mainstream USA. 

Modern economics of so called 'free markets' have ONLY used two mechanisms to create economic value : Cheap labor and cheap RM at source. These have been the driving forces of the whole capitalist shooting match...Since Ricardo's legacy of comparative advantage days...It's latest defining memento, before globalisation showed us the way by cheap labor, was the age of 'cheap oil'. The driving force of the post WW2 American age. How anyone can make a statement like the thread above is beyond my imagination as it junks economic facts of the last century. We are in gobbeldy-gook land with this witch doctor of economic medicine! Without cheap oil and cheap labor where would our capitalist Oligarchy be? Now they've betrayed the capitalist paradigm right down to its very roots. By making it into financialized bubble economy, voodoo feudal territory, 'Tonton macoute' country, and not rational resource allocation based on economic cycles. We are in totally feudal, subjective decision making  territory of terrifying global consequences. The age of the Military Industrial complex...? As reasonable resource allocation is now impossible until this Oligarchy falls to its very rotten core structure.

Mon, 05/02/2011 - 14:43 | 1230943 gerryscat
gerryscat's picture

Uh, if China's GDP per capita is low and the US is high, who do you think has the opportunity to go higher? Can you spell C-h-i-n-a?

Mon, 05/02/2011 - 15:09 | 1231009 Dr. Acula
Dr. Acula's picture

>Uh, if China's GDP per capita is low and the US is high, who do you think has the opportunity to go higher? Can you spell C-h-i-n-a?

GDP is meaningless and non-scientific. First, there is no means to sum or to compare the subjective valuations of two people or to compare the subjective valuation of one person at different times. Second, GDP is flawed because it omits leisure, which is an important and scarce economic good. (Who couldn't use more leisure?). Third, GDP is flawed because it omits autistic exchanges - if I give up an hour of my time to clean my toilet, why isn't that service included in GDP?

Also, your principle seems dubious. Which technology advanced faster in a 10-year period? A caveman's club or a modern day person's CPU? I agree that China will grow at a greater pace, but I just don't agree with your reason.

Mon, 05/02/2011 - 14:46 | 1230963 Dr. Acula
Dr. Acula's picture

>How big is China’s economy compared to ours?

This entirely depends on how you define "big". Measuring the calories of food consumed, it is a bigger economy. In terms of cars owned, it is a smaller economy. In terms of Ming dynasty vases possessed, China is superior - unless you happen to not like that kind of good. In terms of country music songs produced, USA is superior.

But fortunately, countries do not battle each other economically but rather, to the extent permitted, entwine to maximize the benefits of comparative advantage.

Mon, 05/02/2011 - 14:55 | 1231002 falak pema
falak pema's picture

China has three things that the US hasn't : a low standard of living, a hungry young population, and no pseudo-democratic Barnum's show every four years where you elect the man in front manipulated by those who decide behind the curtain. The thirty nine steps ...is a Hitchcockian film that shows us where the US MAY be heading... In China its much more simple its ...politically totalitarian...the way to go without the curtain?

Mon, 05/02/2011 - 15:15 | 1231100 Mec-sick-o
Mec-sick-o's picture

Yeah, inflate debt and you get higher GDP.

Consumer spending is a big % GDP.

You have confused production or productivity with spending.

 

Mon, 05/02/2011 - 15:38 | 1231192 GFORCE
GFORCE's picture

The U.S. may be ahead in economy size but this is just another of the constant barrage of tired metrics which has no real bearing on our lives.

Economists have a very successful record of not being able to predict the future, but yet we get this constant drivel to justify their existence.

Mon, 05/02/2011 - 15:43 | 1231224 malek
malek's picture

Well you discredited your headline yourself. Qatar is #1, closely followed by the mighty Liechtenstein!!!

On a more serious note, a comparison to stats 5 years and 10 years ago might be helpful.

Mon, 05/02/2011 - 15:48 | 1231254 kaiserhoff
kaiserhoff's picture

Developing countries don't develop.  Not always true, but that's the way to bet.

Mon, 05/02/2011 - 16:09 | 1231353 slewie the pi-rat
slewie the pi-rat's picture

par-tee like it's 1959!

Mon, 05/02/2011 - 16:31 | 1231438 AldoHux_IV
AldoHux_IV's picture

Do people still take what the IMF has to say seriously still?  They're just another extension of the centrally planned authoritarian regime hell bent on enlsaving the world economy-- they're about as insightful as nipple hair growing on a pig's teet-- or at least the fed.

Mon, 05/02/2011 - 17:37 | 1231795 Mallenet
Mallenet's picture

I come from Jersey (see GDP per person top 10 list) and can personally confirm that in my Island the 'Big Mac' measure was dropped years ago, we now measure social wealth by the number of Chinese restaurants within walking distance of any house!  In fact, you cannot sell a house that is not located near the location of the new family dinner - we call it 'tak-a-way'!

Mon, 05/02/2011 - 22:23 | 1232623 Baptiste Say
Baptiste Say's picture

Why does everyone think the Renmimbi appreciating will be bad for China? As it stands the RMB is artificially held low which encourages direct investment in factories. Problem is it makes food/power costs prohibitive for the Chinese.

 

As the RMB appreciates cost of food/power will fall for them meaning the average Chinese will become more well off, because the currency is appreciating it will be seen as safe and trillions of dollars will flow into it so investment will not fall off by any means.

 

People, be concerned about a falling currency, be concerned about a dollar collapse but don't be concerned about a currency appreciation, the latter is good in more ways than one.

Mon, 05/02/2011 - 22:28 | 1232627 Baptiste Say
Baptiste Say's picture

Anyway, even if the CPC complete fuck up nothing is going to hold down the growth of a nation of 1.3 billion hungry and ambitious individuals, especailly given the huge amount of mineral and oil wealth they've accumulated over the years.

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