World Bank Says China Not So Big Economically
A reworking of global economic statistics coordinated by the World Bank measured China's economy as 40% smaller in dollar terms than previously thought.
The World Bank group looked at prices in 146 countries to come up with more accurate rankings of economic might, poverty and wealth. It is difficult to compare countries internationally because they have different currencies and because global products are priced differently in different nations. As any traveler can testify, a bottle of Coca-Cola costs more in Europe than the U.S.
The World Bank tried to put together a global set of statistics for the year 2005. When national economic output was converted into dollars at the prevailing exchange rate, the U.S. has 28% of global gross domestic output. A better measure, many economists figure, is to compare the cost of commodities and services in different nations. By that measure, the U.S. share was just 23%
As the report by the 'International Comparison Program' explained, if a Big Mac costs $4 in the U.S. and 4.80 euros in France, than the conversion rate is 1.20 euros to the U.S. dollar -- no matter what the official exchange rate is. In other words, for every euro that the French spend on Big Macs in Paris -- at least those French who would admit to such purchases -- Americans would spend 83 cents for the same amount of Big Macs.
The comparison program looked at a lot more than hamburgers; it collected data on the prices of more than 1,000 goods and services in 100 countries to come up with a 'purchasing power parity' figure for converting national currencies into dollars.
The recalculation especially affected China because this is the first time the country has been surveyed in a rigorous fashion for price data. Previous estimates of China's purchase power parity were based on a comparison of 1986 prices between China and the U.S., the World Bank said, even though that didn't take into account changes in prices since then.
Under the old calculation, China had a GDP of $8.8 trillion, about 15% of global GDP of $59 trillion. According to the new calculation, China's economy shrank by 40% to $5.3 trillion, which is about 10% of global GDP of $55 trillion.
In this survey, China submitted price statistics from 11 cities, which still leaves out rural areas -- and so may not be as accurate as possible. The report said it didn't believe the estimate of China's GDP was off by more than 5%.
Under the new calculations, India had 4% of global GDP, Russia had 3%. Their shares of global output were higher than they would be when measuring at market rates. The reverse was often the case in rich industrialized nations.
The International Comparison Program used purchasing power parity statistics to rank national wealth and poverty. The nations with the highest GDP per capita are Luxembourg, Qatar, Norway, Burnei Darussalam and Kuwait, all of which are tiny economies. By looking at individual consumption, the list changes somewhat. The richest are Luxembourg, U.S., Iceland, Britain and Norway.
The poorest nation on earth, as ranked by GDP per capita, is the Democratic Republic of Congo, followed by Liberia, Burundi, Zimbabwe and Guinea-Bissau.
A traveler's advisory: according to the new stats, the cheapest places to buy things are Tajikistan, followed by Ethiopia, Gambia, Kyrgyz Republic and Bolivia. The most expensive are Iceland, Denmark, Switzerland, Norway and Ireland.
From chinese.wjs.com
BOB DAVIS
Dec 18th 2007 09:33
The World Bank group looked at prices in 146 countries to come up with more accurate rankings of economic might, poverty and wealth. It is difficult to compare countries internationally because they have different currencies and because global products are priced differently in different nations. As any traveler can testify, a bottle of Coca-Cola costs more in Europe than the U.S.
The World Bank tried to put together a global set of statistics for the year 2005. When national economic output was converted into dollars at the prevailing exchange rate, the U.S. has 28% of global gross domestic output. A better measure, many economists figure, is to compare the cost of commodities and services in different nations. By that measure, the U.S. share was just 23%
As the report by the 'International Comparison Program' explained, if a Big Mac costs $4 in the U.S. and 4.80 euros in France, than the conversion rate is 1.20 euros to the U.S. dollar -- no matter what the official exchange rate is. In other words, for every euro that the French spend on Big Macs in Paris -- at least those French who would admit to such purchases -- Americans would spend 83 cents for the same amount of Big Macs.
The comparison program looked at a lot more than hamburgers; it collected data on the prices of more than 1,000 goods and services in 100 countries to come up with a 'purchasing power parity' figure for converting national currencies into dollars.
The recalculation especially affected China because this is the first time the country has been surveyed in a rigorous fashion for price data. Previous estimates of China's purchase power parity were based on a comparison of 1986 prices between China and the U.S., the World Bank said, even though that didn't take into account changes in prices since then.
Under the old calculation, China had a GDP of $8.8 trillion, about 15% of global GDP of $59 trillion. According to the new calculation, China's economy shrank by 40% to $5.3 trillion, which is about 10% of global GDP of $55 trillion.
In this survey, China submitted price statistics from 11 cities, which still leaves out rural areas -- and so may not be as accurate as possible. The report said it didn't believe the estimate of China's GDP was off by more than 5%.
Under the new calculations, India had 4% of global GDP, Russia had 3%. Their shares of global output were higher than they would be when measuring at market rates. The reverse was often the case in rich industrialized nations.
The International Comparison Program used purchasing power parity statistics to rank national wealth and poverty. The nations with the highest GDP per capita are Luxembourg, Qatar, Norway, Burnei Darussalam and Kuwait, all of which are tiny economies. By looking at individual consumption, the list changes somewhat. The richest are Luxembourg, U.S., Iceland, Britain and Norway.
The poorest nation on earth, as ranked by GDP per capita, is the Democratic Republic of Congo, followed by Liberia, Burundi, Zimbabwe and Guinea-Bissau.
A traveler's advisory: according to the new stats, the cheapest places to buy things are Tajikistan, followed by Ethiopia, Gambia, Kyrgyz Republic and Bolivia. The most expensive are Iceland, Denmark, Switzerland, Norway and Ireland.
From chinese.wjs.com
BOB DAVIS
Dec 18th 2007 09:33