The IMF measures both GDP in market-exchange terms and in terms of purchasing power. On the purchasing-power basis, China is overtaking the US right about now and becoming the world's biggest economy.
By the end of 2014, China will make up 16.48% of the world's purchasing-power adjusted GDP (or $17.632 trillion), and the US will make up just 16.28% (or $17.416 trillion). Adjusted for Purchasing Power, China is now the world's largest economy according to IMF.
However in real terms the US is still far ahead, China still sits more than $6.5 trillion lower than the US and isn't likely to overtake for quite some time.
Business Insider: http://ow.ly/CrVnx
China produces a much greater amount of exports and their population is far higher than ours and our debt keeps going up every year not helping our cause at all. I feel China will eventually catch up in the long run to our real terms.
ReplyDeleteOne major caveat associated with the IMF projection is that the comparison between the U.S. and China is based on purchasing power parity. The PPP, which differentiates how far money goes in each country, fails to reflect where the two countries stand vis-à-vis each other. Because of this, many experts suggest that the U.S. may still instead have the largest economy.
ReplyDeleteChina being a country that is booming in the international trading and exporting business was bound to take over in being the Worlds largest economy. Although in real terms it is unlikely to overtake USA for sometime, i feel that it is imminent that eventually China will succeed in this aspect to due to its the high number of good produced and exported in the country.
ReplyDeleteThe article makes the case that Chine has the highest valued market, rather than the largest real economy. The purchasing power parity is a technique used to determine the relative value of different currencies. It is used to estimate what the exchange rate between two currencies would have to be in order for the exchange to be equal with the purchasing power of the two countries currencies.Both economies are far and above the largest in the world. The United States has purchasing power parity has declined over time as the rest of the world has grown, but will not fall off anytime soon.
ReplyDeleteChina is sitting on a lot of debt, so although they are the biggest economy in the world today, they still have a long way to go. It makes sense that by the end of this year, China will have almost 16.5% of the world's purchasing power, since China is very reliant on their importing and exporting market.
ReplyDelete