How Much Has China Grown? Really…

Friday, November 16, 2007 10:40
Posted in category The Big Picture
Comments Off on How Much Has China Grown? Really…

Anyone who has lived in China at any point in the last 10 years will attest to the growth of China’s east coast cities. For many who watched China’s rise, one of the most amazing measures was GDP growth, and the fact that China has been able to sustain double digit growth for so many years.

but has it? Or is China smaller than we have been lead to believe by various sources?

Well, if Albert Kiedel of Carnegie’s Endowment for International Peace has read an AD report right, China may actually be 40% smaller than previously thought.

In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China’s economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China’s size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China’s economy will turn out to be 40 per cent smaller than previously stated.

Now, as I have said in a few posts – I am not an economist. But, I have a few questions.. and a few remarks:

1) How could the World Bank (and dozens of other) economists been so wrong

2) Is PPP really an accurate means to measure the size of an economy?

If wrong, one of the statistics that was grossly incorrect was:

instead of World Bank estimates of roughly 300m people below the dollar-a-day poverty line, the number was more likely more than 500m.

If true, I would be interested to learn how this would change trade policies and strategies. Perhaps it won’t make a difference, but I would suspect a 15% RMB revaluation using the new smaller economy would have a different effect? Does this make balancing out the economy easier? Does this mean that the rich/ poor gap is bigger or smaller?

Any and all thoughts are encourage (JD… this seems right up your alley)

Other recent articles by Albert Kiedel are:

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