China's economy smaller in new study: World Bank

Updated: 2007-12-18 10:33

"The previous, less reliable, methods led to estimates of their GDPs (gross domestic product) that were 40 percent larger than the results of the new, improved methods and benchmark."

China still ranks as the world's second largest economy with over nine percent of world production using PPP, but that compared with 14 percent under the old methodology.

India is the fifth largest with over four percent of the world total. That is down from six percent using the previous method but up from two percent using market exchange rates.

In the study, the United States still has the world's biggest economy with 23 percent of global output. That compares with 29 percent using market rates.

Japan ranks third under the PPP method with seven percent of global output.

The study said the survey "should not be used as indicators of the under- or overvaluation of currencies."

Albert Keidel, an economist at the Carnegie Endowment for International Peace who has studied China's economy and had earlier suggested that the Chinese economy was overestimated, said the new report highlights deeper poverty problems in the country.

"This will mean there is even more of the population under the dollar-a-day poverty line than had been estimated," Keidel said.

Nariman Behravesh, chief economist at the research firm Global Insight, said the new report has only limited implcations for public policy.

"China will continue to play a major locomotive role in the global economy," Behravesh told AFP.

"The size of China is of small importance. What matters is the growth of China and its's growing so rapidly."

Behravesh said the huge revision shows that PPP estimates must use a number of judgments that may be arbitrary.

"I was skeptical about the earlier estimate and I take this one with a measure of caution. The numbers are not that reliable," he said.

The PPP method "says a dollar goes further in China on things like haircuts and personal services," he said. "But trade flows are at market rates so you have to be very careful about using PPP to measure the size of the economy."

Traditional market estimates show China's output at 2.244 trillion dollars. The new PPP would make that 5.333 trillion, below the 8.819 trillion based on prior World Bank surveys.

The PPP method shows the economies with the highest output per capita are Luxembourg, Qatar, Norway, Brunei, and Kuwait; the lowest are the Democratic Republic of Congo, Liberia, Burundi, Zimbabwe, and Guinea-Bissau.

Another measure -- per capita individual consumption -- a measure of what households consume, suggests the richest economies are Luxembourg, United States, Iceland, Britain and Norway.

   1 2   

Related Stories  
Top China News  
Today's Top News  
Most Commented/Read Stories in 48 Hours