China Is Not yet Number One

Jeffrey Frankel

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2015, vol. 10, issue 1, 1-6

Abstract: Many claim that China will soon overtake the US. I argue that this claim is based on a misuse of statistics. The International Comparison Program (ICP) price data is necessary to compare living standards, since a dollar's worth of yuan buys more in China than a dollar buys in the US. But the fact that rice and clothes are cheap in rural China does not make the Chinese economy larger. What matters for size in the world economy is how much a yuan can buy on world markets. Using the correct prices, the US remains the world's largest economic power by a substantial margin.

Keywords: China; US; PPP; GDP; exchange rate (search for similar items in EconPapers)
JEL-codes: E01 F41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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