Just The Facts

China Economy: Already Larger Than U.S.

When will China overtake the United States as the world’s largest economy?

Credit: leungchopan Shutterstock.com

Takeaways


  • US GDP stood at $16.8 trillion in 2013 —just about 4% larger than China’s economy.
  • The IMF estimates that China’s GDP at purchasing power parity was $17.6 trillion at the end of 2014.
  • Since price level in China is lower than in the US, a dollar in China buys more than a dollar in the US.

1. China has long been the world’s largest nation in terms of population.

2. China’s re-emergence as an economic superpower began in the late 1970s, when then leader Deng Xiaoping introduced a series of economic reforms.

3. By 2013, the Chinese economy had grown to $16.1 trillion, measured at purchasing power parity.

4. That same year, U.S. GDP stood at $16.8 trillion at that time — or just about 4% larger than China’s economy.

5. Given China’s higher economic growth rate, at some point during 2014 China overtook the United States as the world’s largest economy when measured on a purchasing power parity.

6. The IMF estimates that China’s GDP at purchasing power parity was $17.6 trillion at the end of 2014 — or about 1% larger than the U.S. GDP of $17.4 trillion.

7. Measuring GDP at purchasing power parity takes into account the differences in prices that people pay for goods and services in different economies.

8. Since the price level in China is still much lower than in the United States, a dollar in China buys much more than a dollar in the United States.

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Responses to “China Economy: Already Larger Than U.S.”

Archived Comments.

  1. On September 26, 2015 at 2:55 pm Kevin Hobbs responded with... #

    The China Project is 43.41% complete.

  2. On September 26, 2015 at 7:20 pm matimal responded with... #

    43.4122982% I think.

  3. On September 26, 2015 at 7:22 pm matimal responded with... #

    No it isn’t. Not even close.

  4. On September 26, 2015 at 8:14 pm panasian responded with... #

    What you are thinking about is the GDP in NOMINAL EXCHANGE RATE TERMS. In these terms, China’s GDP is about 60% of that of the U.S. But sometime between 2022 and 2026, China will overtake America even in NOMINAL terms.

  5. On September 26, 2015 at 10:22 pm matimal responded with... #

    I’m thinking of GDP in DOLLAR TERMS. Things are worth what they can get on the open market.

  6. On September 26, 2015 at 10:45 pm panasian responded with... #

    That’s exactly what I’m talking about. You get the Chinese GDP figure by using the dollar-yuan exchange rate.

  7. On September 26, 2015 at 11:41 pm matimal responded with... #

    But the Yuan’s value is only realized when it IS converted to dollars. Only then is its value really established. If it remains in china, it is part of the massively distorted Chinese system and it’s value is unclear.

  8. On September 27, 2015 at 12:06 am panasian responded with... #

    For international transactions ,specially for imports, China must convert yuan into dollar euro, etc at the prevailing exchange rate. So the nominal exchange rate GDP is much more applicable to Chinese imports than GDP based on PPP( purchasing power parity). But domestic economic activity is much better reflected by GDP based on PPP. So these two systems have their own pluses and minuses, Neither one is 100% perfect to measure accurately a country’s GDP.

  9. On September 27, 2015 at 12:07 am matimal responded with... #

    So, what is china’s GDP growth rate?

  10. On September 27, 2015 at 12:31 am panasian responded with... #

    I think it’s going to be somewhere between 6.5% and 7%.

  11. On September 27, 2015 at 1:12 am panasian responded with... #

    I think China’s economy is a lot bigger than the official numbers indicate. The Economist states that due to the old habit inherited from the Soviets, the Chinese government has been chronically underestimating the true size of services sector which is the biggest part of economy. Also many enterprises and business people vastly underreport their real incomes and there is a huge grey( unofficial) economy in China. According to a book titled CHINA: THE BIG LIE? published in 2014, there is a 10 trillion dollar grey economy in China in addition to the official economy. Let me put the 10 trillion dollar grey economy in perspective. In America, the grey economy is roughly about 10% of the official economy but the Chinese 10 trillion- dollar grey economy means it’s about 90% of the official economy. According to the Big Mac Index by the Economist, the Chinese Yuan is about 40% undervalued and Goldman Sachs also states that the Yuan is about 10% undervalued. When you add all these things together, the real Chinese economy must be a lot bigger than the official figures show. Since the services sector is the biggest part ( almost 50%) of the economy, we should pay more attention to service sector PMI than the manufacturing PMI. Unlike the contracting manufacturing sector, Chinese services sector has been expanding at healthy clips, because of fast-growing consumption that powered 60% of the Chinese economic growth in the first half of this year. It means China’s structural reform, moving from manufacturing and investment to consumption-driven economy, has been progressing nicely. I also want to say something about the accuracy of Chinese government’s statistics. Even the people who come up with all kinds of numbers to refute the Chinese government figures, ultimately base their findings on some of the Chinese government’s data such as power consumption, rail- freight volume. A lot of so-called experts make a big deal of the disconnect between robust Chinese GDP figures and low numbers for electricity consumption and rail – freight volume. We should remember that since 2013 , China’s services sector has been the biggest part of economy replacing manufacturing sedtor. Services sector consumes far less electricity per unit of GDP than manufacturing sector. Also services sector uses a lot less raw materials than manufacturing sector. In recent years, China increased the efficiency of it’s electricity use too. That means trains carry far less coal for generating electricity and iron ore, copper,etc for manufacturing. When we put all these things together, we end up with the Chinese economy producing the same amount of GDP with far less electricity and rail -freight volume. So there is nothing wrong with the disconnect between the strong official GDP numbers and timid electricity consumption and rail-freight numbers.. According to The Economist, a well-respected British economics and current affair magazine, the Chinese central government statistics are now reasonably reliable because the central government’s National Bureau of Statistics pretty much ignore the inflated local governments’ statistics instead uses it’s own figures gained from it’s own independent surveys. If skeptics don’t trust the Chinese government’s numbers, what makes you think their findings based on selective Chinese government data are right? I can see these China -bashers only cherry-pick supposedly unreliable Chinese government data to fit their own preconceived notions. If these people don’t trust the Chinese government data, then they have to completely disregard it instead of cheery-picking. Also they must use the data that has nothing to do with Chinese government whatsoever. But then how can I know these supposedly independent data is more reliable than the Chinese government one? In order to earn my trust, they have to prove to me their independent data is absolutely beyond reproach. So far no independent organization has proved to me it’s data is any better than Chinese government one. A few days ago there was an article in Wall Street Journal stating that Chinese economy is bigger than thought. To read the synopsis of the article, just go to Asia Times and type CHINA;S ECONOMY MIGHT BE BIGGER THAN PREVIOUSLY THOUGHT

  12. On September 27, 2015 at 9:47 am matimal responded with... #

    I don’t think we can know what china’s economy is and is doing. That’s the way the CCP wants it. That’s what makes china so dangerous.

  13. On September 27, 2015 at 9:48 am matimal responded with... #

    So it’s going to increase by several percentage points from where the Financial Times, Goldman Sachs, and many other economists think it is now?

  14. On September 27, 2015 at 11:50 am panasian responded with... #

    It all depends on how the Chinese economy performs.

  15. On September 27, 2015 at 11:51 am panasian responded with... #

    Well, that’s just your opinion.

  16. On September 27, 2015 at 11:54 am matimal responded with... #

    So was your post.

  17. On September 27, 2015 at 11:57 am panasian responded with... #

    So you keep yours and I’ll keep mine.

  18. On September 27, 2015 at 12:08 pm matimal responded with... #

    I’ll say what I like where I want.

  19. On September 27, 2015 at 12:18 pm matimal responded with... #

    How is the Chinese economy performing NOW?

  20. On September 27, 2015 at 12:23 pm panasian responded with... #

    Good for you !!!

  21. On September 27, 2015 at 12:52 pm panasian responded with... #

    I think it has been performing reasonably well. But it will take many years to transit successfully from an investment-driven economy to a consumption- driven economy.

  22. On September 27, 2015 at 3:07 pm matimal responded with... #

    What is the current rate of growth in the Chinese Gross Domestic Production NOW?

  23. On September 27, 2015 at 3:08 pm matimal responded with... #

    Maybe someday you’ll be able to do the same in China!

  24. On September 27, 2015 at 3:35 pm panasian responded with... #

    Hey boy, You got me wrong . I happen to be an American and served as a paratrooper with the elite 82nd Airborne Division of the U.S. Army.

  25. On September 27, 2015 at 3:38 pm panasian responded with... #

    Around somewhere between 6.5% and 7%.

  26. On September 27, 2015 at 8:53 pm matimal responded with... #

    hmhmhmhmhm….what do you know that all western economists don’t?

  27. On September 27, 2015 at 8:53 pm matimal responded with... #

    right…..

  28. On September 27, 2015 at 9:30 pm panasian responded with... #

    You better, boy.

  29. On September 27, 2015 at 10:17 pm matimal responded with... #

    You need to leave your basement apartment and see the real world, boy.

  30. On September 27, 2015 at 10:43 pm panasian responded with... #

    Hey boy, go back to your mommy’s rundown trailer .

  31. On September 27, 2015 at 11:38 pm matimal responded with... #

    My mother died 10 years ago, but she lived in a nice house which inherited. I sold it to a nice young couple. I don’t see how I could follow your advice. How’s your basement apartment?

  32. On September 28, 2015 at 12:32 am panasian responded with... #

    A typical all -grown up spoiled kid, living off his mother’s wealth. Basement apartment ? I wonder what that is !!!

  33. On September 28, 2015 at 10:42 am matimal responded with... #

    Thanks for your sympathy. The money for the house was hardly enough to live on. I’m a teacher/administrator at a community college. I also research and write on American history.

  34. On September 28, 2015 at 1:15 pm panasian responded with... #

    Good for you. We need more community colleges in our country to accommodate the students from lower-middle class who either lack the money or time to go to 4-year colleges.