Could China Pass U.S. as Top Economy this Year?
The United States has always been known worldwide to be one of the richest countries in the world. However, that could change very soon according to experts. According to a report recently released by World Bank, China could surpass the United States’ economy this year.
The World Bank’s findings are based on one measure called purchasing power parity. Essentially, this is a measurement used to determine the relative value of different currencies; moreover, it rather gives an idea the difference of standard of living between countries.
E.g. If you travel in a taxi in China from point A to B that is approximately 10 miles, it cost you $4. However, in the United States that would a lot more than $4. Since this report measures an economic view of standard of living, it is certainly does not mean that China will pass the United States’ economy because there other variables involve.
The new report says that China is rapidly closing in gross economic terms. It is logical to think that China would surpass the United States’ Gross Domestic Product (GDP) since the population in China is more than four times that in the United States. However, the story is completely different. Also according to the World Bank in 2013, the United States’ GDP was $16.3 trillion and China’s $9.4 trillion. It clearly shows a huge gap between the two countries.
Nariman Behravesh, a Chief Economist at the consulting firm IHS Inc, gave his opinion about this new report released by the World Bank. He said, “The typical Chinese person is still much, much poorer than the typical American person and has a lot of catching up to do. And that gap will not be closed for decades.” This statement given by Behravesh is certainly true. This report does not consider many other factors that represents a good stable economy such as the one that the Unites States has.
The average Chinese person earns an approximately of $9,100 a year. On the other hand, an average American earns four times more than a Chine person does, approximately, $49,800.
The new report presented by the World Bank might not accurately mean that China will surpass the United States as top economy this year; it only gives a certain concept of the difference of purchasing power in two complete countries. Is it good or bad? It is certainly a hard question because there are other factors to consider.
The only statement that this report represents for sure is that if you want to buy a product or service at a super lower price than the United States’ prices, you should definitely go to China and buy it there.