" China poised to pass US as world’s leading
economic power
Last Updated: Wednesday, April 30, 2014, 10:57
The US is on the brink of losing its status as the
world’s largest economy, and is likely to slip behind
China this year, sooner than widely anticipated,
according to the world’s leading statistical agencies.
The US has been the global leader since overtaking
the UK in 1872. Most economists previously thought
China would pull ahead in 2019.
The figures, compiled by the International
Comparison Program (ICP) hosted by the World Bank,
are the most authoritative estimates of what money
can buy in different countries and are used by most
public and private sector organisations, such as the
International Monetary Fund. This is the first time
they have been updated since 2005.
After extensive research on the prices of goods and
services, the ICP concluded that money goes further
in poorer countries than it previously thought,
prompting it to increase the relative size of emerging
market economies.
The estimates of the real cost of living, known as
purchasing power parity or PPPs, are recognised as
the best way to compare the size of economies rather
than using volatile exchange rates, which rarely
reflect the true cost of goods and services: on this
measure the IMF put US GDP in 2012 at $16.2 trillion,
and China’s at $8.2 trillion.
In 2005, the ICP thought China’s economy was less
than half the size of the US, accounting for only 43
per cent of America’s total. Because of the new
methodology - and the fact that China’s economy has
grown much more quickly - the research placed
China’s GDP at 87 per cent of the US in 2011.
For 2011, the report says: “The US remained the
world’s largest economy, but it was closely followed
by China when measured using PPPs”.
With the IMF expecting China’s economy to have
grown 24 per cent between 2011 and 2014 while the
US is expected to expand only 7.6 per cent, China is
likely to overtake the US this year.
The figures revolutionise the picture of the world’s
economic landscape, boosting the importance of
large middle-income countries. India becomes the
third-largest economy having previously been in
tenth place. The size of its economy almost doubled
from 19 per cent of the US in 2005 to 37 per cent in
2011.
Russia, Brazil, Indonesia and Mexico make the top 12
in the global table. In contrast, high costs and lower
growth push the UK and Japan further behind the US
than in the 2005 tables while Germany improved its
relative position a little and Italy remained the same.
The findings will intensify arguments about control
over global international organisations such as the
World Bank and IMF, which are increasingly out of line
with the balance of global economic power.
When looking at the actual consumption per head, the
report found the new methodology as well as faster
growth in poor countries have “greatly reduced” the
gap between rich and poor, “suggesting that the
world has become more equal”.
The world’s rich countries still account for 50 per
cent of global GDP while containing only 17 per cent
of the world’s population.
Having compared the actual cost of living in different
countries, the report also found that the four most
expensive countries to live in are Switzerland,
Norway, Bermuda and Australia, with the cheapest
being Egypt, Pakistan, Myanmar and Ethiopia.
Financial Times
© 2014 irishtimes.com "
economic power
Last Updated: Wednesday, April 30, 2014, 10:57
The US is on the brink of losing its status as the
world’s largest economy, and is likely to slip behind
China this year, sooner than widely anticipated,
according to the world’s leading statistical agencies.
The US has been the global leader since overtaking
the UK in 1872. Most economists previously thought
China would pull ahead in 2019.
The figures, compiled by the International
Comparison Program (ICP) hosted by the World Bank,
are the most authoritative estimates of what money
can buy in different countries and are used by most
public and private sector organisations, such as the
International Monetary Fund. This is the first time
they have been updated since 2005.
After extensive research on the prices of goods and
services, the ICP concluded that money goes further
in poorer countries than it previously thought,
prompting it to increase the relative size of emerging
market economies.
The estimates of the real cost of living, known as
purchasing power parity or PPPs, are recognised as
the best way to compare the size of economies rather
than using volatile exchange rates, which rarely
reflect the true cost of goods and services: on this
measure the IMF put US GDP in 2012 at $16.2 trillion,
and China’s at $8.2 trillion.
In 2005, the ICP thought China’s economy was less
than half the size of the US, accounting for only 43
per cent of America’s total. Because of the new
methodology - and the fact that China’s economy has
grown much more quickly - the research placed
China’s GDP at 87 per cent of the US in 2011.
For 2011, the report says: “The US remained the
world’s largest economy, but it was closely followed
by China when measured using PPPs”.
With the IMF expecting China’s economy to have
grown 24 per cent between 2011 and 2014 while the
US is expected to expand only 7.6 per cent, China is
likely to overtake the US this year.
The figures revolutionise the picture of the world’s
economic landscape, boosting the importance of
large middle-income countries. India becomes the
third-largest economy having previously been in
tenth place. The size of its economy almost doubled
from 19 per cent of the US in 2005 to 37 per cent in
2011.
Russia, Brazil, Indonesia and Mexico make the top 12
in the global table. In contrast, high costs and lower
growth push the UK and Japan further behind the US
than in the 2005 tables while Germany improved its
relative position a little and Italy remained the same.
The findings will intensify arguments about control
over global international organisations such as the
World Bank and IMF, which are increasingly out of line
with the balance of global economic power.
When looking at the actual consumption per head, the
report found the new methodology as well as faster
growth in poor countries have “greatly reduced” the
gap between rich and poor, “suggesting that the
world has become more equal”.
The world’s rich countries still account for 50 per
cent of global GDP while containing only 17 per cent
of the world’s population.
Having compared the actual cost of living in different
countries, the report also found that the four most
expensive countries to live in are Switzerland,
Norway, Bermuda and Australia, with the cheapest
being Egypt, Pakistan, Myanmar and Ethiopia.
Financial Times
© 2014 irishtimes.com "