What’s the real size of China’s economy? – Asia Times

The World Bank completed one of its periodic International Comparison Program ( ICP ) assessments in May, which “officially” determines purchasing power parity GDP.

The league tables of the nation’s largest economy shifted just enough for the obsessives to observe while springing no actual upsets. Princeton will likely be Harvard this year, but it’s mostly unimportant whether Yale will be ranked above or below.

For the obsessives, China’s guide versus the US expanded by 5.6 %, India inched closer to China, Japan kept its performance and sliding down a bug, Russia moved forward of Germany, France ahead of the UK, Indonesia tumbled two spots and Brazil rose one place. The best 10 remained the top 10.

Russia supporters can beat their breasts over a 13 % boost in PPP GDP, and the British may be worried about dropping out of the top 10, all of which aside, the most recent ICP did not produce any noteworthy discoveries. Nor should it have.

Monthly charges studies are required to assess and maintain the correctness of PPP adjustments. But, if they produce significant shifts, either too much time has passed between studies or the approaches have malfunctioned.

The ICP is a large task. According to The Economist, World Bank experts visited 16, 000 shops in China only to obtain price information. The latest Ib analysis collected data in 2021, four times after the 2017 study. And the conclusion is that China’s GDP was undervalued by US$ 1.4 trillion pushing China’s 2022 PPP GDP from 119 % of the US to 125 %.

According to the Economist, China’s National Bureau of Statistics ( NBS ) was not impressed, downplaying the results stating,” We need to interpret the… results with caution and correctly grasp the global economic landscape and the status of each economy in it” while stressing China remained a “developing economy”. The rest of this article will definitely be hated if the NBS did no like such a humble upward revision to China’s PPP GDP.

China’s PPP GDP is only 25 % larger than that of the US? Come on persons… who are we kidding? China produced 2x as little power as the US did last year, and it produced 2x as many steel and 22 times as many cement. China’s ships accounted for over 50 % of the country’s production while US production was small. In 2023, China produced 30.2 million cars, nearly three times more than the 10.6 million made in the US.

On the require area, 26 million cars were sold in China last year, 68 % more than the 15.5 million sold in the US. Foreign buyers bought 434 million cellphones, three days the 144 million sold in the US. China consumes eight times as many seafood and twice as much meat as the US as a nation. Chinese consumers spent more money on pleasure items than Americans did.

In 2023, Chinese travelers took 620 million flights, 25 % fewer than the 819 million flights taken by Americans, but Chinese travelers also took 3 billion trips on high- speed rail ( and 685 million on traditional rail ), significantly more than the 28m Amtrak trips. &nbsp, &nbsp, &nbsp,

All of the above are size or unit measurements, with the exception of extravagance goods, and must be adjusted to ensure that the quality and features are similar to those on an apple. The World Bank conducted 16, 000 buy visits, and we would assume that we would dismiss them as severely underestimating China’s PPP GDP.

But that is precisely what we are going to accomplish. It is prima facie absurd that China’s production and consumption, at combinations of US amounts, can be accurately discounted for lower quality/features to arrive at a bare 125 % of US PPP GDP. &nbsp,

We do n’t believe the World Bank has done a poor job, either. Contrary to popular belief, we think China’s NBS has been lowballing GDP for generations, and the World Bank must operate within the bounds of the NBS’s reported information. This was politically significant years ago for WTO compromises, and it is still politically significant now as China competes for the position of leader in the global south.

We think that China’s GDP and PPP GDP are debalanced by a partial transition from the national accounts’ Material Product System ( MPS), which excludes services by design. The World Bank is likely doing its due diligence by measuring services consumption in China at a fraction of the US while doing so with goods use in multiples of the US.

The United Nations System of National Accounts ( UNSNA ) sets out voluntary guidelines and specifically advises countries to base their national accounts on local circumstances. What that has meant in the West is to embrace all UNSNA “innovations” introduced over the years.

Things like assigned book, legal fees and R&amp, D are now all included in GDP. Because… hey, why not? The UK now includes both illegal medicines and trafficking as part of its GDP. According to UNSNA’s 2008 recommendations, improper business exercise should be included in GDP.

China’s NBS stood its surface on a conceptual level. The Leninist MPS views services as needed costs for materials production as opposed to creating true value, either rightly or incorrectly. In its first attempt to convert MPS to SNA in 1985, China added a ridiculously low 13 % to the MPS range and called it China’s service GDP.

The World Bank has twisted the NBS’s arm over the years, but with minimal success, for modestly increasing China’s service GDP.

The affordability crisis in European economies, the US in particular, is essentially driven by prices of essential services – book, care, training and childcare – not by made goods. Although these costs have increased in China, they have decreased significantly and a large portion of GDP is still left out.

The price and service warfare that have broken out across all business and products are also not included in the ICP study conducted in 2021; they are a boon for consumers but a gift for businesses.

This is most evident in the car market in China, where OEMs are either offering cutting-edge technology for peanuts ( a 2, 000 kilometer range BYD Q plug-in hybrid electric vehicle for$ 14, 000 ) or cutting prices to the bone ( Hyundai Sonatas down from$ 42, 000 ). In 2023, the cost of solar panels dropped 50 %, and this trend will continue to decline until 2024. By the end of 2024, CTL has announced plans to reduce lithium-ion battery prices by half. &nbsp,

Restaurants are providing white glove amenities like freshly scented lotion by the sink, swanky remodeled interiors, and hot towels by the sink. Handout bottled water and fruit plates are hand-made. Large LLM prices have been reduced by tech companies to essentially free. Unable to quantify, service quality in China is now far superior to that in the West and possibly even Japan.

A breakdown in the definition of GDP has resulted from adhering to UNSNA. As Western economies ‘ need for services grow as they become more prevalent, their growth does not appear to lead to discernable increases in living standards.

Are US universities and healthcare two times as good as they were in 2000? If US households have not gotten vastly improved healthcare, education, housing and childcare over the past two decades, then inflation has been systematically underreported and GDP growth may have, in fact, been less than 1 % per annum ( instead of 2 % ), which equals stagnation given 0.8 % per annum population growth. This may help to explain the rise of popular ire and the end of American politics. &nbsp,

China’s material-focused GDP may be a better indicator of the economy’s living standards, especially since UNSNA has obviously lost its mind by now officially recommending that drugs, prostitution, illegal gambling, and theft be taken into account when GDP is measured.

When Western defense analysts make wildly inflated estimates of China’s defense spending, they are on to something. But it’s not China’s defense spending that is lowballed – it is Western defense spending, especially by the Pentagon, which needs to be reassessed.

The US Navy has slowed while China’s$ 236 billion budget has created the largest navy by ship count in the world, despite the$ 1 trillion that the US spends annually on defense ( including programs for intelligence and energy department programs ).

Analysts who lament that only 13 % of domestic consumption is made up of China, but that it accounts for 30 % of the world’s manufacturing output, are also far off the mark. China accounts for 20 to 40 % of the world’s total consumer goods demand, but the majority of the services it uses are excluded from national accounts.

So how much is it? How big is China’s economy really? About six months ago, this writer estimated that China’s GDP needed to be grossed up by 25- 40 % to be on a UNSNA basis.

However, Han Feizi’s mental map of price and value has deteriorated after shopping for cars, purchasing a domestic brand carbon fiber road bike with all the bells and whistles for$ 2, 600 ( equivalent to a$ 15, 000 Trek ), renting cars for$ 20 a day, staying at boutique hotels for$ 30 ( and losing it right away ), paying less than the deductible on expat health insurance, and receiving white glove customer service for the smallest purchases. &nbsp, &nbsp, &nbsp,

No, the ICP did not do a lousy job. The initial conditions that China’s NBS imposed on them initially hampered them. And the data released in 2024 was taken in 2021 – ancient history in China. The NBS was confounded by the recent ICP adjustment of a few percentage points in China’s PPP GDP in relation to the US.

However, it is true that an accurate adjustment would be made by a multiplier or two.