Home > Uncategorized > China has the world’s largest economy: Get over it

China has the world’s largest economy: Get over it

from Dean Baker

It is more than a bit annoying to hear reporters endlessly refer to China as the world’s second largest economy. It isn’t. It’s the world’s largest economy and has been since 2017. Here are the data from the International Monetary Fund.

Source: International Monetary Fund.

As the chart shows, China’s economy first passed the U.S. in 2017. It is projected to be more than 16 percent larger this year, and by 2025 is projected to be almost 40 percent larger by 2025.

Purchasing power parity (PPP) measures of GDP are based on applying a common  set of prices for all goods and services produced across countries. While it is difficult to measure accurately, most economists view PPP as being the better way to calculate GDP, since it reflects living standards and does not fluctuate with currency values. China does have four time the population of the United States, so it is still much poorer on a per capita basis.

The fact that China has a larger GDP than the United States is important for policy debates since many people seem to hold illusions are about the ability of the U.S. to influence China. While United States can take steps that will damage China’s economy, even the harshest measures will only have limited impact, and China will be able to take steps to overcome them through time. This is important background for debates on China policy.

  1. Ikonoclast
    December 28, 2020 at 12:49 am

    I agree that China “has the world’s largest economy and it has been since 2017”. I would say since the start of 2017, not the end. PPP is the most accurate of the GDP measures. GDP measuring, even in PPP, is very inaccurate. The proper measures, disaggregated, are of real stuff. China produces far more food, concrete and steel than the US and uses far more energy. The real Chinese economy is already at least double that of the real US economy.

    The US alone cannot influence China. The world can still influence China. I mean both the real world and the geopolitical world. In terms of the real world, there are not enough resources and climate change buffering left for China to safely complete and maintain its modernization and ascension to first world status for its entire population. Of course, China will attempt to do this anyway. That means China will, as the last nail in the coffin, ensure runaway climate change and civilizational collapse. If China tries to complete its project it will destroy all of us.

    Should the rest of the world seek to slow China down? Probably, if they want to survive. China would likely react so badly, like all spoiled superpower brats do, that they would start a huge war. Damned if we do. Damned if we don’t. The juggernaut of China will drag us all into the abyss.

    But we, the West, unleashed all this: meaning nationalism, imperialism, colonialism and endless growth capitalism. We even enabled China out of our own pure greed. It’s partly our own fault and partly the unavoidable nature of homo sapiens. Like every other species, we cannot control our reproduction and population growth instincts. Without natural controls, predators etc., all species choke their environment to death. Mother nature (to anthropomorphize) is about to implement its final control on us; the complete breakdown of the current biosphere system and a reboot on the order of millions of years.

    Even the pride of a civilization is as nothing to the earth, the solar system and the cosmos. China may briefly enjoy its time in the sun. It won’t last long. Vanity of vanities. All is vanity.

    • Craig
      December 28, 2020 at 5:12 pm

      “Vanity of vanities. All is vanity.”

      Indeed.

      Of course if it were much more profitable to pursue alternative energy sources and much less costly to purchase green consumption of all kinds because twin 50% discounts/rebates at retail sale and at the point of loan signing enabled such ecological sanity and also enabled the kind of mega fiscal projects needed to off planet/under planet the most CO2 polluting means of production, then climate change might be sufficiently mitigated for technological civilization and the large percentage of human and all other species might survive.

      That’s all.

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