Postings and assignments for students in Econ 3334 at UH
Tuesday, January 15, 2008
It matters how you count things
This article is a nice example of why we spend so much time learning how to count GDP. The upshot is that due to a different way of counting, we think China and India are about 40% smaller, in GDP terms, than before.
11 comments:
Anonymous
said...
Certainly. It matters how you count. So therefore since the dollar is the bar, can we look at it's breakdown in relationship. I'd be interested to see how the components measure up-Private consumption, Government consumption, Gross fixed investment, Exports of goods/services, Imports of goods/services.
The presented article describes an economic recalculation that occurred regarding China and its Real GDP. Until recently, most analyses of China’s relative production had been only guesswork because using foreign purchasing-power parities would not be accurate and simply converting GDP into dollar amounts would understate the size of the economy because that calculation does not take into account the relative price level in China: a dollar there goes much further there. One estimate of China’s Real GDP in 2005, which calculated it at 8.9 trillion USD, was measured using an Index Year during the 1970’s--the pinnacle of governmental control of the economy as mandated by communism. This government control was very inefficient and caused extremely high price levels which. Since then, the Chinese economy has steadily shifted towards free trade and capitalism causing prices to drop significantly. This means that China’s Real GDP was inflated relative to other nations. This can be seen now that the International Monetary Fund and the World Bank have recalculated the PPPs of 1000 goods in most countries. Using this purchasing power as an index, China’s GDP has been calculated at 5.3 trillion USD--a 40% decrease.
The economic concept discussed in this article is the calculation of Real GDP and it’s comparison to other nations. Nominal GDP is equal to the quantity of goods produced in a given year multiplied by the price level of those goods in the same year. Real GDP is equal to the given year’s quantity multiplied by the price level of a base year which allows it to account for variation in the price level from year to year. As stated earlier though, while using RGDP to compare the average production of different countries is more accurate than using Nominal GDP, it does not take into account the variability of price level in other countries, hence the use of PPPs.
My reaction to this is generally positive in that more correct data is always preferable. Other than that I am nonplussed by the vitriol this recalculation has been met with by the world community. The pro-China blogoshpere has decried the calculation as capitalist institutions trying to downplay the economic prowess of the Chinese market and to marginalize the country (as though it were possible). Meanwhile, the hyper-nationalist-American crowd see it as a major defeat for China in spite of the fact that even by the new measurement they are still the fastest growing economy in history. The only people remaining quiet on the issue are the Chinese themselves because they see it as an opportunity to further convey themselves as a developing nation and secure all the benefits of the title, including exemption from the Kyoto Protocol. It all feels like much adieu about nothing to me. Nothing has changed excepting our accuracy in measuring and even so, GDP in a country is simply not an important statistic. The statistics that do actually matter are GDP per capita and the growth rate of GDP which for China are still both very low and very high respectively.
In the article, "Clipping the dragon's wings", the author states that China's GDP has lowered by 40%.Although US is top dog in GDP of 2005, the only way to get a real estimate of countries GDP is by calculating the real numbers. When taking that into consideration Chinas not too bad after all. Even though Chinas economy is now being viewed as smaller than before, the country's growth rate still remains the same, as stated in the article. to this day, it remains the world's largest consumer of steel, the 2nd biggest user of energy. It is assumed that China is playing down its numbers in hopes of portraying itself as a poor country so they can have more reasonable negotiotions on exchange rates with America. Other big economies have lowered their total GDP by 40 % also, countries such as India which took over Japan's economy in 2006. In summary new numbers compared to old numbers make a huge difference in how much a countries economy is actually worth.
Let me preface this post by saying that this is my first look into economics in a current setting. I have studied economics, but never in a matter that dealt with a specific current event. I look forward to doing so and encourage any feedback, positive or negative.
“Clipping the Dragon’s Wings”, an article about the recalculation of China’s GDP, takes a look at the way the World Bank compares the economies of different nations. It also discusses the fact that a poor country’s (no definition is given for “poor”) GDP is difficult to convert into dollars because a dollar will buy much more in an emerging economy. The author then explains that the World Bank converts GDPs into dollars using purchasing power parities (PPP). A purchasing power parity exchange rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods. It is often used to compare the standards of livings between countries, rather than a per-capita gross domestic products comparrison. It resembles the consumer price index’s basket of goods measurement, but adjusted for multiple nations. Under the new calculations, China’s GDP was 40% less than previous measurements. Their 2005 GDP measuremnt fell from $8.9 trillion to $5.3 trillionThis occurred because the previous measurements were used with price levels from the 1970s.
By no means does this mean that China is still not an economic power-house. They are still in the midst of an economic boom, the rate of which has not been seen in any large country in over 30 years. This year it will become the world’s largest exporter, overtaking Germany, and in the next decade China will top America as the world’s largest economy. The new GDP measuremnts are welcomed by Chinese policy makers because they allow the nation to still claim to be a developing nation and to be entitled to any exchange-rate or trade benefits that come with that classificaiton. China’s citizens, however will be no better of worse off due to these new calculations. The numbers simply give us a way to compare nations.
I thought the article was informative. I would have liked to know a little more about the “old” way China’s GDP was calculated. I think that would have helped me to understand the article a bit more. I also want to know what leeway China recieves by being labeled a “poor” country. The topic was brought up, but no details were given. These new findings don’t really impact my life in the present. Maybe they will in the long-run, but to me it just seems like this is a way for countries to see who has the fattest wallet.
“Clipping the dragon’s wings” article illustrates that a recent recalculation reveals that the booming Chinese economy is much smaller than previously thought. The grossly overstated statistic is not due to deceptive practices on behalf of the Chinese government. On the contrary, due to a change in the way the World Bank calculates and compares international economies, economists have discovered that China’s GDP is 40% smaller than previously estimated.
Because the dollar’s purchasing power is greater in China’s emerging economy than it is in the US economy, converting emerging country’s GDP into dollars can understate the true size of its economy. Consequently, the IMF and World Bank prefer to use a method which converts GDPs into dollars using PPPs, or purchasing-power parities. This method of calculating GDP takes into account price differences between countries. While previous estimates of China’s PPP were arbitrary, the World Bank’s new calculations are based on a survey of the prices of more than 1,000 goods and services in 146 countries. For the first time, this survey now includes China. According to the new formula, China’s 2005 GDP was $5.3 trillion, which equates to $2.2 trillion under market exchange rates. According the previous PPP estimates, this figure would have been $8.9 trillion, which is still well under the U.S.’s GDP, which was $12.4 trillion in 2005.
Although China’s economy is much smaller than previously though, its economy continues to be the fastest-growing over a 30 year period ever. China remains the world’s largest producer and consumer of steel, the second largest consumer of energy, and the second largest economy world-wide. If China is able to sustain its growth rate, it is expected to overtake Germany as leading exporter, and within 10 years, it will be projected to overtake the U.S. as the world’s largest economy.
Despite China’s astounding growth rate, the country typically attempts to downplay PPP numbers in hopes of gaining advantage and leniency when negotiating exchange rates and trade with the U.S. In sharp contrast to the Chinese, Indians tend to boast that they overtook Japan in 2006, at that time claiming the world’s third largest GDP. This, however, is no longer true as the World Bank’s new calculations have resulted in a nearly 40% reduction in India’s GDP. Brazil has also faced a consequential reduction in its GDP. The reduction in the GDPs of Brazil and the emerging Asian economies has let to a subsequent reduction in the emerging economies’ share in world output. The previous figure, which was 50% has now been cut to 46%, thereby delaying the seemingly impending economic dominance of these countries.
The article describes the change in China's Real GDP as a result of the change in the process that the World Bank used to calculate GDP. Real GDP is the measure of wealth of everyone in the economy of that country. The new method calls for the use of market exchange rates tied to the U.S. dollar. The difference between this method and the old method, which was based on purchasing power, shows a 40% drop in China's Real GDP.
The main reason for this drop off, as the article presents it, is because "a dollar buys much more in an emerging market such as China than it does in America." Such would explain the article's graph showing how the old measurement for GDP had China within several trillion dollars of the United States.
The differences are most noticeable in poorer countries, whereas wealthy nations had almost identical GDP's from the calculation change. However, these changes do not necessarily indicate a decline in progress, as many experts still feel that China's rapid growth rate could propel them past the United States in purchasing power within the next 10 years.
What is somewhat ironic about all of this is that both Chinese officials and American nationalists are pleased by these numbers. To the Chinese administrators, this reinforces the concept of China as a developing nation, still needing benefits and aid from other countries like the United States. To the American nationalists, this lessens fears that China would overtake the U.S. economy and that a communist nation would have the largest economy in the world.
From my perspective, all of this means little except for a change in how the statistics and numbers are used to measure economic power. These figures negate many other important numbers to show economic power, such as GDP per capita, which measures the GDP divided by each individual in that society. They also do not prove or disprove much of anything new, at least in terms of ideology, other than that the means for calculating GDP has changed by World Bank's standard. Perceptions of both countries remain largely the same.
Although China is growing rapidly, we will not have a very clear indication as to the whether the well-being of its citizens are improving until the countries GDP per capita rises and the standard of living of its citizens improves. Until then, Japan should most likely be considered the more stable country in Asia.
Clipping the Dragon’s Wings, is an article that talks about the declining numbers in China’s and India’s GDP over the past year. The countries’ purchasing-power parities are also calculated. In the recent year China’s GDP has dropped about 40% compared the previous year. This is good news for the United States, but not so much for China. The author also mentioned China’s purchasing-parity power (PPP). As a strategic move to present themselves as a poor country China has kept its PPP low. Their reason for doing this is because they wanted the United States to give flexibility towards their exchange rates and trade. But it’s a different story with India; they are the type of country that likes to brag about their status. For instance, like in the year 2006 when their GDP surpasses that of Japan. This gave India something to boast about. Sadly, this is no longer the truth, as stated above, both China and India’s GDP has been hacked by 40%.
When taken into consideration it matters a lot when one is making comparisons between real GDP versus nominal GDP. According to the text, when nominal GDP is calculated inflation is not taken into consideration. So it is included into the calculations. As for real GDP inflation is accounted for. For example, China’s nominal GDP may surpass that off Japan’s but in reality when we compare the two countries’ real GDPs Japan’s may well surpass that of China.
On a personal note, I believe that this article proves that when it comes down to it, it really does matter how you count thing. Because not all things are really what they seem to be when you size it down and analyze it. One country may seem like a big and powerful when we look at their nominal GDP, but when we include inflation and calculate real GDP then that country may not seem so big at all.
In the article “Clipping the dragon’s wing” it is argued that China’s GDP is not what we all believed it is. With a new calculation of the world’s economy we came to realize that even with China fastest growing rate over the last 30 years as stated on the article, it is well below America’s GDP. In the past we use to use an old scale when comparing the world GDP with that of America’s and the fact that it was more as a close economy not introducing imports into the country. Therefore not making it very accurate now a days since a lot of revolution has happen in developing countries when America was already well ahead of it. Another point in this article is that base on the new GDP results, China’s policy maker still have a good argument point in exchange rates with America since it is still portray as a poor country, or at least more poor than what they thought.
“Clipping the Dragon’s Wings”, from Economist.com, is a brief explanation of the rise of several developing nations’ gross domestic product, GDP. The author focused mainly on the Chinese’s rapid growth in the last several years. According to the article, China’s GDP is forty percent smaller than reported earlier by the World Bank. China’s GDP in terms of Yuan remains the same, however when compared to the dollar it is deflated. This is due to American dollars being able to purchase more goods in China than in America. Gross domestic product is defined, by dictionary.com, as the total market value of all the goods and services produced within the borders of a nation during a specific period. World Bank was unable to accurately estimate the purchasing-power parties, which are used to account price differences between countries. China’s GDP, however inflated, is still the world’s second largest economy and has the fastest growing economy, for a large country, in history. China’s growth can be attributed to being the largest exporter in the world as well as the world’s largest producer of steel. At the rate that the Chinese economy is growing, china will have the world’s largest economy, surpassing America, by 2018.
“Clipping the Dragon’s Wings”, from Economist.com, is a brief explanation of the rise of several developing nations’ gross domestic product, GDP. The author focused mainly on the Chinese’s rapid growth in the last several years. According to the article, China’s GDP is forty percent smaller than reported earlier by the World Bank. China’s GDP in terms of Yuan remains the same, however when compared to the dollar it is deflated. This is due to American dollars being able to purchase more goods in China than in America. Gross domestic product is defined, by dictionary.com, as the total market value of all the goods and services produced within the borders of a nation during a specific period. World Bank was unable to accurately estimate the purchasing-power parties, which are used to account price differences between countries. China’s GDP, however inflated, is still the world’s second largest economy and has the fastest growing economy, for a large country, in history. China’s growth can be attributed to being the largest exporter in the world as well as the world’s largest producer of steel. At the rate that the Chinese economy is growing, china will have the world’s largest economy, surpassing America, by 2018. I suppose that it does matter how you count things, as accounting has been known to be misleading. I predict that many other countries will have rapidly growing economies as they piggy-back the development ideas from other wealthier nations that have already experienced industrial and technological revolutions. I work at a major retail outlet and I have customers who refuse to purchase Chinese goods, so maybe the growth rate of their economy will decrease. Hopefully the countries mention in the article will also increase the quality of living for their citizens. If the Chinese are healthier and happier, than who cares what there GDP is.
It really does matter how you count things. The article “Clipping the dragon’s wings” talks about just that. The author talked about how China’s gross domestic product (GDP) is significantly less than what was previously though. This is due to how the World Bank is now calculating GDP differently to compare different economies. The author has stated that IMF and the World Bank are now choosing to “convert GDPs into dollars using purchasing – power parities (PPP).” Before, it was being converted into dollars at the current market exchange rates. The results were many economies being poorer than what was previously thought including China. This does not however, change the way China is growing, according to the author. China’s growth rate is still the “fastest over 30 years of any large country in history,” said the author. It still remains the second largest economy in the world as well as being one of the top countries in other things such as being the “largest producer and consumer of steel.”
With that said, GDP is the total income and the total expenditure on its output of goods and services. PPP is basically a one price set applied in the international market place.
I am curious about what services were used in the survey. I know that a service like a haircut cannot be traded and the cost might be more expensive in one country then another. Also, I have read that many economists do not think that PPP provides a clear or accurate description of the world so is it worth using. When China surpasses America’s economy in PPP terms, how will life be like in China? Will its people still be in extreme poverty? I also wonder how most Americans will react to being surpassed by China in PPP terms. My guess is it will probably frighten most but a lot of things can happen in 10 years.
11 comments:
Certainly. It matters how you count. So therefore since the dollar is the bar, can we look at it's breakdown in relationship. I'd be interested to see how the components measure up-Private consumption, Government consumption, Gross fixed investment, Exports of goods/services, Imports of goods/services.
The presented article describes an economic recalculation that occurred regarding China and its Real GDP. Until recently, most analyses of China’s relative production had been only guesswork because using foreign purchasing-power parities would not be accurate and simply converting GDP into dollar amounts would understate the size of the economy because that calculation does not take into account the relative price level in China: a dollar there goes much further there. One estimate of China’s Real GDP in 2005, which calculated it at 8.9 trillion USD, was measured using an Index Year during the 1970’s--the pinnacle of governmental control of the economy as mandated by communism. This government control was very inefficient and caused extremely high price levels which. Since then, the Chinese economy has steadily shifted towards free trade and capitalism causing prices to drop significantly. This means that China’s Real GDP was inflated relative to other nations. This can be seen now that the International Monetary Fund and the World Bank have recalculated the PPPs of 1000 goods in most countries. Using this purchasing power as an index, China’s GDP has been calculated at 5.3 trillion USD--a 40% decrease.
The economic concept discussed in this article is the calculation of Real GDP and it’s comparison to other nations. Nominal GDP is equal to the quantity of goods produced in a given year multiplied by the price level of those goods in the same year. Real GDP is equal to the given year’s quantity multiplied by the price level of a base year which allows it to account for variation in the price level from year to year. As stated earlier though, while using RGDP to compare the average production of different countries is more accurate than using Nominal GDP, it does not take into account the variability of price level in other countries, hence the use of PPPs.
My reaction to this is generally positive in that more correct data is always preferable. Other than that I am nonplussed by the vitriol this recalculation has been met with by the world community. The pro-China blogoshpere has decried the calculation as capitalist institutions trying to downplay the economic prowess of the Chinese market and to marginalize the country (as though it were possible). Meanwhile, the hyper-nationalist-American crowd see it as a major defeat for China in spite of the fact that even by the new measurement they are still the fastest growing economy in history. The only people remaining quiet on the issue are the Chinese themselves because they see it as an opportunity to further convey themselves as a developing nation and secure all the benefits of the title, including exemption from the Kyoto Protocol. It all feels like much adieu about nothing to me. Nothing has changed excepting our accuracy in measuring and even so, GDP in a country is simply not an important statistic. The statistics that do actually matter are GDP per capita and the growth rate of GDP which for China are still both very low and very high respectively.
In the article, "Clipping the dragon's wings", the author states that China's GDP has lowered by 40%.Although US is top dog in GDP of 2005, the only way to get a real estimate of countries GDP is by calculating the real numbers. When taking that into consideration Chinas not too bad after all. Even though Chinas economy is now being viewed as smaller than before, the country's growth rate still remains the same, as stated in the article. to this day, it remains the world's largest consumer of steel, the 2nd biggest user of energy. It is assumed that China is playing down its numbers in hopes of portraying itself as a poor country so they can have more reasonable negotiotions on exchange rates with America. Other big economies have lowered their total GDP by 40 % also, countries such as India which took over Japan's economy in 2006. In summary new numbers compared to old numbers make a huge difference in how much a countries economy is actually worth.
Let me preface this post by saying that this is my first look into economics in a current setting. I have studied economics, but never in a matter that dealt with a specific current event. I look forward to doing so and encourage any feedback, positive or negative.
“Clipping the Dragon’s Wings”, an article about the recalculation of China’s GDP, takes a look at the way the World Bank compares the economies of different nations. It also discusses the fact that a poor country’s (no definition is given for “poor”) GDP is difficult to convert into dollars because a dollar will buy much more in an emerging economy. The author then explains that the World Bank converts GDPs into dollars using purchasing power parities (PPP). A purchasing power parity exchange rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods. It is often used to compare the standards of livings between countries, rather than a per-capita gross domestic products comparrison. It resembles the consumer price index’s basket of goods measurement, but adjusted for multiple nations. Under the new calculations, China’s GDP was 40% less than previous measurements. Their 2005 GDP measuremnt fell from $8.9 trillion to $5.3 trillionThis occurred because the previous measurements were used with price levels from the 1970s.
By no means does this mean that China is still not an economic power-house. They are still in the midst of an economic boom, the rate of which has not been seen in any large country in over 30 years. This year it will become the world’s largest exporter, overtaking Germany, and in the next decade China will top America as the world’s largest economy. The new GDP measuremnts are welcomed by Chinese policy makers because they allow the nation to still claim to be a developing nation and to be entitled to any exchange-rate or trade benefits that come with that classificaiton. China’s citizens, however will be no better of worse off due to these new calculations. The numbers simply give us a way to compare nations.
I thought the article was informative. I would have liked to know a little more about the “old” way China’s GDP was calculated. I think that would have helped me to understand the article a bit more. I also want to know what leeway China recieves by being labeled a “poor” country. The topic was brought up, but no details were given. These new findings don’t really impact my life in the present. Maybe they will in the long-run, but to me it just seems like this is a way for countries to see who has the fattest wallet.
Zack Schwartz
“Clipping the dragon’s wings” article illustrates that a recent recalculation reveals that the booming Chinese economy is much smaller than previously thought. The grossly overstated statistic is not due to deceptive practices on behalf of the Chinese government. On the contrary, due to a change in the way the World Bank calculates and compares international economies, economists have discovered that China’s GDP is 40% smaller than previously estimated.
Because the dollar’s purchasing power is greater in China’s emerging economy than it is in the US economy, converting emerging country’s GDP into dollars can understate the true size of its economy. Consequently, the IMF and World Bank prefer to use a method which converts GDPs into dollars using PPPs, or purchasing-power parities. This method of calculating GDP takes into account price differences between countries. While previous estimates of China’s PPP were arbitrary, the World Bank’s new calculations are based on a survey of the prices of more than 1,000 goods and services in 146 countries. For the first time, this survey now includes China. According to the new formula, China’s 2005 GDP was $5.3 trillion, which equates to $2.2 trillion under market exchange rates. According the previous PPP estimates, this figure would have been $8.9 trillion, which is still well under the U.S.’s GDP, which was $12.4 trillion in 2005.
Although China’s economy is much smaller than previously though, its economy continues to be the fastest-growing over a 30 year period ever. China remains the world’s largest producer and consumer of steel, the second largest consumer of energy, and the second largest economy world-wide. If China is able to sustain its growth rate, it is expected to overtake Germany as leading exporter, and within 10 years, it will be projected to overtake the U.S. as the world’s largest economy.
Despite China’s astounding growth rate, the country typically attempts to downplay PPP numbers in hopes of gaining advantage and leniency when negotiating exchange rates and trade with the U.S. In sharp contrast to the Chinese, Indians tend to boast that they overtook Japan in 2006, at that time claiming the world’s third largest GDP. This, however, is no longer true as the World Bank’s new calculations have resulted in a nearly 40% reduction in India’s GDP. Brazil has also faced a consequential reduction in its GDP. The reduction in the GDPs of Brazil and the emerging Asian economies has let to a subsequent reduction in the emerging economies’ share in world output. The previous figure, which was 50% has now been cut to 46%, thereby delaying the seemingly impending economic dominance of these countries.
The article describes the change in China's Real GDP as a result of the change in the process that the World Bank used to calculate GDP. Real GDP is the measure of wealth of everyone in the economy of that country. The new method calls for the use of market exchange rates tied to the U.S. dollar. The difference between this method and the old method, which was based on purchasing power, shows a 40% drop in China's Real GDP.
The main reason for this drop off, as the article presents it, is because "a dollar buys much more in an emerging market such as China than it does in America." Such would explain the article's graph showing how the old measurement for GDP had China within several trillion dollars of the United States.
The differences are most noticeable in poorer countries, whereas wealthy nations had almost identical GDP's from the calculation change. However, these changes do not necessarily indicate a decline in progress, as many experts still feel that China's rapid growth rate could propel them past the United States in purchasing power within the next 10 years.
What is somewhat ironic about all of this is that both Chinese officials and American nationalists are pleased by these numbers. To the Chinese administrators, this reinforces the concept of China as a developing nation, still needing benefits and aid from other countries like the United States. To the American nationalists, this lessens fears that China would overtake the U.S. economy and that a communist nation would have the largest economy in the world.
From my perspective, all of this means little except for a change in how the statistics and numbers are used to measure economic power. These figures negate many other important numbers to show economic power, such as GDP per capita, which measures the GDP divided by each individual in that society. They also do not prove or disprove much of anything new, at least in terms of ideology, other than that the means for calculating GDP has changed by World Bank's standard. Perceptions of both countries remain largely the same.
Although China is growing rapidly, we will not have a very clear indication as to the whether the well-being of its citizens are improving until the countries GDP per capita rises and the standard of living of its citizens improves. Until then, Japan should most likely be considered the more stable country in Asia.
- Joey Kelley
Clipping the Dragon’s Wings, is an article that talks about the declining numbers in China’s and India’s GDP over the past year. The countries’ purchasing-power parities are also calculated. In the recent year China’s GDP has dropped about 40% compared the previous year. This is good news for the United States, but not so much for China. The author also mentioned China’s purchasing-parity power (PPP). As a strategic move to present themselves as a poor country China has kept its PPP low. Their reason for doing this is because they wanted the United States to give flexibility towards their exchange rates and trade. But it’s a different story with India; they are the type of country that likes to brag about their status. For instance, like in the year 2006 when their GDP surpasses that of Japan. This gave India something to boast about. Sadly, this is no longer the truth, as stated above, both China and India’s GDP has been hacked by 40%.
When taken into consideration it matters a lot when one is making comparisons between real GDP versus nominal GDP. According to the text, when nominal GDP is calculated inflation is not taken into consideration. So it is included into the calculations. As for real GDP inflation is accounted for. For example, China’s nominal GDP may surpass that off Japan’s but in reality when we compare the two countries’ real GDPs Japan’s may well surpass that of China.
On a personal note, I believe that this article proves that when it comes down to it, it really does matter how you count thing. Because not all things are really what they seem to be when you size it down and analyze it. One country may seem like a big and powerful when we look at their nominal GDP, but when we include inflation and calculate real GDP then that country may not seem so big at all.
- Hang Nguyen
In the article “Clipping the dragon’s wing” it is argued that China’s GDP is not what we all believed it is. With a new calculation of the world’s economy we came to realize that even with China fastest growing rate over the last 30 years as stated on the article, it is well below America’s GDP. In the past we use to use an old scale when comparing the world GDP with that of America’s and the fact that it was more as a close economy not introducing imports into the country. Therefore not making it very accurate now a days since a lot of revolution has happen in developing countries when America was already well ahead of it. Another point in this article is that base on the new GDP results, China’s policy maker still have a good argument point in exchange rates with America since it is still portray as a poor country, or at least more poor than what they thought.
“Clipping the Dragon’s Wings”, from Economist.com, is a brief explanation of the rise of several developing nations’ gross domestic product, GDP. The author focused mainly on the Chinese’s rapid growth in the last several years. According to the article, China’s GDP is forty percent smaller than reported earlier by the World Bank. China’s GDP in terms of Yuan remains the same, however when compared to the dollar it is deflated. This is due to American dollars being able to purchase more goods in China than in America. Gross domestic product is defined, by dictionary.com, as the total market value of all the goods and services produced within the borders of a nation during a specific period. World Bank was unable to accurately estimate the purchasing-power parties, which are used to account price differences between countries. China’s GDP, however inflated, is still the world’s second largest economy and has the fastest growing economy, for a large country, in history. China’s growth can be attributed to being the largest exporter in the world as well as the world’s largest producer of steel. At the rate that the Chinese economy is growing, china will have the world’s largest economy, surpassing America, by 2018.
“Clipping the Dragon’s Wings”, from Economist.com, is a brief explanation of the rise of several developing nations’ gross domestic product, GDP. The author focused mainly on the Chinese’s rapid growth in the last several years. According to the article, China’s GDP is forty percent smaller than reported earlier by the World Bank. China’s GDP in terms of Yuan remains the same, however when compared to the dollar it is deflated. This is due to American dollars being able to purchase more goods in China than in America. Gross domestic product is defined, by dictionary.com, as the total market value of all the goods and services produced within the borders of a nation during a specific period. World Bank was unable to accurately estimate the purchasing-power parties, which are used to account price differences between countries. China’s GDP, however inflated, is still the world’s second largest economy and has the fastest growing economy, for a large country, in history. China’s growth can be attributed to being the largest exporter in the world as well as the world’s largest producer of steel. At the rate that the Chinese economy is growing, china will have the world’s largest economy, surpassing America, by 2018.
I suppose that it does matter how you count things, as accounting has been known to be misleading. I predict that many other countries will have rapidly growing economies as they piggy-back the development ideas from other wealthier nations that have already experienced industrial and technological revolutions. I work at a major retail outlet and I have customers who refuse to purchase Chinese goods, so maybe the growth rate of their economy will decrease. Hopefully the countries mention in the article will also increase the quality of living for their citizens. If the Chinese are healthier and happier, than who cares what there GDP is.
It really does matter how you count things. The article “Clipping the dragon’s wings” talks about just that. The author talked about how China’s gross domestic product (GDP) is significantly less than what was previously though. This is due to how the World Bank is now calculating GDP differently to compare different economies. The author has stated that IMF and the World Bank are now choosing to “convert GDPs into dollars using purchasing – power parities (PPP).” Before, it was being converted into dollars at the current market exchange rates. The results were many economies being poorer than what was previously thought including China. This does not however, change the way China is growing, according to the author. China’s growth rate is still the “fastest over 30 years of any large country in history,” said the author. It still remains the second largest economy in the world as well as being one of the top countries in other things such as being the “largest producer and consumer of steel.”
With that said, GDP is the total income and the total expenditure on its output of goods and services. PPP is basically a one price set applied in the international market place.
I am curious about what services were used in the survey. I know that a service like a haircut cannot be traded and the cost might be more expensive in one country then another. Also, I have read that many economists do not think that PPP provides a clear or accurate description of the world so is it worth using. When China surpasses America’s economy in PPP terms, how will life be like in China? Will its people still be in extreme poverty? I also wonder how most Americans will react to being surpassed by China in PPP terms. My guess is it will probably frighten most but a lot of things can happen in 10 years.
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