Adjusted for purchasing power, China’s economy is a quarter larger than that of the USA. The “Asia Times” says that in reality China’s lead is much greater. In the West, gross national product is systematically calculated very generously, while in China it is calculated very conservatively.
In terms of nominal gross domestic product, the USA is ahead of China. However, if you take into account the different price levels of the countries, things look different: In terms of gross domestic product adjusted for purchasing power, China has overtaken the USA – it is about 25 percent larger. However, it has about five times the population. But are the figures even correct? The “Asia Times” asks: How big is China’s economy really?
The 25 percent increase compared to the USA is a significant increase. Previously, the value was around six percent. For the purchasing power adjusted gross domestic product, the price level in a country must be determined. This does not happen every year; the process is very complex. The data now used comes from 2021 – for this purpose, the World Bank collected prices in 16,000 Chinese stores. The Chinese statistics office played down the increase, but at the same time patriotically celebrated the new strength.
China far ahead of the USA in key figures
The “Asia Times” has not launched its own investigation. However, it does point out points that call the official figures into question. These indicate that the Chinese economy is far stronger than assumed. In 2023, 26 million vehicles were sold in China, compared to 15.5 million in the USA – that’s 68 percent more. For smartphones, the figure was 300 percent. The Chinese consumed twice as much beef and eight times as much fish and seafood. They spent twice as much on luxury goods. The list could go on and on. China generated twice as much electricity as the USA, produced almost 13 times as much steel and 22 times as much cement.
The USA is slightly ahead when it comes to air travel – but not any more when you add in the three billion trips made by the Chinese on their high-speed trains. The paper’s conclusion: “It seems absurd at first glance that China’s production and consumption, which are many times higher than the US level, are reduced to just 125 percent of US GDP based on purchasing power parity.”
The Chinese giant appears smaller than it is
The “Asia Times” assumes that the discrepancy lies in the way the data is collected. The Chinese Bureau of Statistics works very conservatively. It mainly records the production of goods (“Material Product System”, MPS) and neglects that of services. This leads to the politically desired effect that the Chinese giant appears smaller than it really is. Basically, this assessment is based on a fundamentally different assessment of economic processes. The Leninist leadership viewed services as a necessary cost and an accompanying factor in the production of goods, but not as a source of added value in its own right.
It is not forbidden. Countries have a lot of leeway in these calculations. This just makes comparisons between countries difficult. While Beijing calculates itself down, the opposite effect occurs in the West. Great Britain even includes illegal drugs and prostitution. In China, on the other hand, no one thinks of including the fashion there of hiring a partner for going out in the calculation of GDP.
According to the “Asia Times”, the different approach has two consequences: Services, whether shady or staid, exist in China just as they do in other countries. It’s just that the service share of the Chinese economy remains invisible in the statistics. But that’s only the primary effect; a second effect could be much more explosive.
Growth only through goods production
The “Asia Times” points out that industrial goods have not been the main price driver in recent years. Quite the opposite. In China, but also in the West, the prices of numerous goods are falling – such as electric cars, home and entertainment electronics. But solar systems and home storage systems are also becoming cheaper. In the West, on the other hand, the costs of central services such as rent, health care, nursing care and, depending on the country, also education and childcare are rising.
Once again, it is clear that GDP growth does not necessarily contribute to quality of life. High rents and university costs increase the economic volume, but do not make students and tenants happier. “While essential services are taking up an ever larger share of western economies, their growth does not seem to lead to a noticeable improvement in living standards,” writes the “Asia Times”.
The core problem: China’s economic growth is based on the production of goods, while the West’s growth is based on price developments in the service sector. The author, Han Feizi, estimates that China’s economy would be about 25 to 40 percent larger if the same calculation methods as in the West were used.
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Source: Stern
