The China Story You Should Pay Attention to, and the One You Should Ignore

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The China Story You Should Pay Attention to, and the One You Should Ignore
Skip past anything that talks about a coming dawn of the Chinese Century. Go straight to stories on the complications of China in the here-and-now.
JAMES FALLOWSMAY 1 2014, 4:11 PM ET

First, the China stories you should skip. Using up my once-per-lifetime pass for such activity, I am about to show a screenshot of a tweet that I myself put out two days ago.

The backstory here is the newly released result of a big, years-long, international (UN) effort to calculate price levels around the world—and thus to improve the "Purchasing Power Parity" figures for comparing spending power in different countries. Simplest example: a few years ago, 1 U.S. dollar was officially worth about 8 Chinese yuan renminbi, or RMB. That rate is not set on an open market like, say, dollar-euro rates, but instead is carefully "managed" by the Chinese government. But if average prices in China were only half as high as in the U.S., then on a PPP basis the Chinese economy would be twice as large as the official exchange rate made it seem, since the RMB would go twice as far in buying things.

The newest results show (to oversimplify) that effective Chinese prices have been even lower than assumed, and therefore the purchasing power of Chinese RMB has been even greater. After these adjustments, the overall Chinese economy is deemed to be about 20 percent larger than previously believed—and therefore either it already has, or it very soon will, "overtake" the United States to become, in PPP terms, the world's biggest economy.

Thus silly (over)reactions like this, from The Economist:
The China Story You Should Pay Attention to, and the One You Should Ignore - James Fallows - The Atlantic

 

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The U.S. Is Big and Rich. China Is Just Big
By Peter Coy May 01, 2014


Let’s assume, for the sake of argument, that China’s economy is on the verge of surpassing the U.S. economy in size. (By one measure, anyway—purchasing power parity as calculated by the World Bank’s International Comparison Program.) What does it mean?

Start with what it doesn’t mean. It doesn’t mean China is rich. All that gross domestic product has to be spread around more than a billion people. On a per-capita basis, the highest-income country in the world in 2011 was the oil-soaked and lightly populated Gulf monarchy of Qatar, at $146,000 per person. The U.S., as this chart shows, was No. 12, at just under $50,000.

China? China was No. 101, at a little less than $10,000 per capita. It’s not labeled on the chart, but if it were, it would appear between Serbia and Dominica.

STORY: China's Income-Inequality Gap Widens Beyond U.S. Levels
It also doesn’t mean that China has the same international heft as the U.S. does. Remember, these figures are calculated according to purchasing power parity, which compares buying power. China looks good by that measure because it has a lower cost of living. A hundred dollars buys more food, haircuts, etc., inside China than it does inside the U.S. But if China wants to buy critical materials from abroad—say, sophisticated electronics or aircraft—what matters is the regular old exchange rate. And by that measure, China’s economy is considerably smaller. It was 47 percent as big as the U.S. economy in 2011 going by the exchange rate vs. 87 percent as big using purchasing power parity.

China itself isn’t embracing the World Bank’s report. The National Bureau of Statistics “expressed reservations” about the study’s methodology and “did not agree to publish the headline results for China,” the report said.

On the other hand, China is even more powerful in another way than these numbers suggest. China runs big trade surpluses that have given it $3.7 trillion worth of foreign-exchange reserves as of last year, most of which are held in dollar investments. The U.S., on the other hand, runs perpetual trade deficits. Sure, the U.S. can make big purchases abroad. But every time it does, it gets deeper in debt to the rest of the world.
The U.S. Is Big and Rich. China Is Just Big - Businessweek

 

[Tommy Knocks]

Oh they passed the U.S last year. That's old.

Their quarter report most def won't show that, cacs like to throw tantrums, cacs have an infatuation being number one, and showing them you're about to pass them in a race, is giving them a greenlight to 'trip/sabotage' you. Clever asians. The chinese have learned its best to keep them blindfolded, none of their reports in the past decade have been accurate, but that's an elephant in the room no one discusses. Everything you read about China's economy in western media is estimation and guessing by economists, that's why reports are always different, showing potential threat and sometimes expected decline, neither of which yet to fruition, which puzzles everyone.

no one actually knows except the chinese, and they're going to keep it that way for awhile. or at least until they've got enough influence to 'counter' the inevitable western tantrum, sabotage, and paranoia. when the U.S finds out China is ahead, all hell is going to break loose. The propaganda machine will go code red.


In reality tho, china's population is too big to have it as modern as the U.S or Japan. anyone expecting them to have what america has, clearly don't know the chinese way of thinking. They dont want to be America, they want to be China. China 2.0. What that is, is yet to be seen but right now we're watching them....and they're clearly active. When my kids are my age, china will be something to behold. Even if it isn't japan.

 

[Rarely-Wrong Liggins]

Welp, that didn't take long