China Replaces U.S. as World’s Largest Economy, IMF ReportsHas the era of American economic hegemony finally come to an end?
Has the era of American economic hegemony finally come to an end?
According to a new IMF report, China has now surpassed the U.S as the world’s largest economy.
The data show that China’s share of the global economy, adjusted for cost of living, is now slightly bigger than that of the United States. China’s gross domestic product is worth $17.6 trillion, when adjusted, compared with $17.4 trillion for the U.S. This was calculated by examining gross domestic product (GDP) alongside cost of living, or purchasing power parity (PPP).
Although this announcement signals an inevitable global shift, the U.S. continues to dominate in other important aspects. In terms of overall size (not adjusted for PPP), the U.S. economy still dwarfs China’s, at $17.4 trillion to $10.4 trillion.
As Business Insider explains, this report is derived from one set of calculations and does not constitute a direct comparison of the two economies:
The simple logic is that prices aren’t the same in each country: A shirt will cost you less in Shanghai than in San Francisco, so it’s not entirely reasonable to compare countries without taking this into account. Though a typical person in China earns a lot less than the typical person in the US, simply converting a Chinese salary into dollars underestimates how much purchasing power that individual, and therefore that country, might have. The Economist’s Big Mac Index is a great example of these disparities.
So the IMF measures both GDP in market-exchange terms and in terms of purchasing power. On the purchasing-power basis, China is overtaking the US right about now and becoming the world’s biggest economy. […]
It’s not all sour news for the US. It’ll be some time yet until the lines cross over in raw terms, not adjusted for purchasing power. By that measure, China still sits more than $6.5 trillion lower than the US and isn’t likely to overtake for quite some time.
— Posted by Roisin DavisWait, before you go…
If you're reading this, you probably already know that non-profit, independent journalism is under threat worldwide. Independent news sites are overshadowed by larger heavily funded mainstream media that inundate us with hype and noise that barely scratch the surface. We believe that our readers deserve to know the full story. Truthdig writers bravely dig beneath the headlines to give you thought-provoking, investigative reporting and analysis that tells you what’s really happening and who’s rolling up their sleeves to do something about it.
Like you, we believe a well-informed public that doesn’t have blind faith in the status quo can help change the world. Your contribution of as little as $5 monthly or $35 annually will make you a groundbreaking member and lays the foundation of our work.Support Truthdig
There are currently no responses to this article.
Be the first to respond.