April 11, 2010
Those are the questions that readers of the WAPO’s Sunday Outlook section must be asking. The Post told readers that: “this year, China’s economy is expected to produce about $5 trillion in goods and services. That would put it ahead of Japan as the world’s second-biggest national economy, but it would still be barely one-third the size of the $14 trillion U.S. economy.”
This reflects China’s GDP measured on an exchange rate basis. However, economists typically use purchasing power parity measures of GDP for international comparisons. By this measure, China’s economy is expected to be about $9.5 trillion this year. At its current growth rate, it will pass the size of the U.S. economy in about five years.
By many measures it is already larger than the U.S.. For example, it has more Internet users, college graduates in science and engineering, a larger car market, and about twice as many cell phone users.
The article also tells readers that the exchange rate will not have much impact on the trade deficit with China. Virtually all economists believe that an increase in the price of imports from China by 20-30 percent would substantially reduce imports. it is not clear why the author of this article believes otherwise.
Comments