China as the New No. 1? Not Quite

Economic growth isn’t as high as billed, and besides, it doesn’t give the whole story

3 min read
illustration showing maps of China and U.S.
Illustration: Chad Hagen

Some milestones are anticipated for years. How many articles have been written on how China will surpass the United States to become the world’s largest economy by—take your pick—2015, 2020, or 2025? The timing depends on what monies we use. It’s already happened in terms of purchasing-power parity, which compares the economic product of different countries by eliminating distortions caused by fluctuations in the exchange rates of their national currencies. In 2013, China’s PPP-adjusted GDP was less than 1 percent behind the U.S. total, according to the World Bank. In 2014, China pulled about 4 percent ahead.

If you rely instead on the yuan-to-U.S.-dollar exchange rate, the United States is still well ahead, about 65 percent higher in 2015 (US $17.9 trillion versus $10.9 trillion). But even with the recent slowdown in Chinese GDP growth—from double digits to an official rate of about 7 percent a year and, in reality, less than that—it is still considerably higher than growth in the United States. It is thus only a matter of time before China becomes No. 1, even in nominal terms.

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We Drive Solar

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