This article is from the source 'independent' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.independent.co.uk/news/business/news/move-over-america-china-overtakes-us-as-worlds-biggest-economy-kind-of-9783050.html
The article has changed 3 times. There is an RSS feed of changes available.
| Version 0 | Version 1 |
|---|---|
| Move over America: China overtakes US as world's biggest economy (kind of) | |
| (35 minutes later) | |
| China has become the world's biggest economy, overtaking the mighty USA, which has been the world's economic superpower for more than a century. But there's a catch: | China has become the world's biggest economy, overtaking the mighty USA, which has been the world's economic superpower for more than a century. But there's a catch: |
| Is this the end of the Pax Americana? | Is this the end of the Pax Americana? |
| If you believe the International Monetary Fund it is. The long awaited day has arrived. The economy of the Middle Kingdom is now bigger than that of Uncle Sam. At least by Purchasing Power Parity. | If you believe the International Monetary Fund it is. The long awaited day has arrived. The economy of the Middle Kingdom is now bigger than that of Uncle Sam. At least by Purchasing Power Parity. |
| Hang on a minute, what’s Purchasing Power Parity? | Hang on a minute, what’s Purchasing Power Parity? |
| Good question. Purchasing Power Parity looks at a country’s gross domestic product (GDP) based on the comparative spending power of the individuals within it combined. It’s an attractive measure because it adjusts for the fact that while wages in supposedly less developed countries tend to be lower than in mature economies, the price of goods and services are often also considerably cheaper. | Good question. Purchasing Power Parity looks at a country’s gross domestic product (GDP) based on the comparative spending power of the individuals within it combined. It’s an attractive measure because it adjusts for the fact that while wages in supposedly less developed countries tend to be lower than in mature economies, the price of goods and services are often also considerably cheaper. |
| Is this something to do with the Big Mac Index? | Is this something to do with the Big Mac Index? |
| That’s not a bad way of looking it. A Big Mac, for example, will cost you a lot less in Beijing than it will in Boston. PPP adjusts for that fact. Of course, in calculating it you have to consider a lot more than just a Big Mac. To make it work you have to look at a vast range of goods and services. And that’s where the problems start. | That’s not a bad way of looking it. A Big Mac, for example, will cost you a lot less in Beijing than it will in Boston. PPP adjusts for that fact. Of course, in calculating it you have to consider a lot more than just a Big Mac. To make it work you have to look at a vast range of goods and services. And that’s where the problems start. |
| Why so? | Why so? |
| Well there have been numerous controversies over the methodology used for calculating PPP. These have kept legions of pointy heads in well paid work for years. Putting it together is also a huge statistical undertaking that can only be done relatively infrequently. In the interim, economists have to rely on estimates. | Well there have been numerous controversies over the methodology used for calculating PPP. These have kept legions of pointy heads in well paid work for years. Putting it together is also a huge statistical undertaking that can only be done relatively infrequently. In the interim, economists have to rely on estimates. |
| Oh. So what does it all mean? | Oh. So what does it all mean? |
| Put it this way, regardless of the debates about statistics even if China isn’t ahead now (and it probably is), it will be soon. Although it will still take several years for it to outpace the US by conventional measures of GDP. | Put it this way, regardless of the debates about statistics even if China isn’t ahead now (and it probably is), it will be soon. Although it will still take several years for it to outpace the US by conventional measures of GDP. |