Millennium Post

China denies it is largest economy on PPP terms

China on Tuesday refuted claims that it has overtaken the United States as the world’s largest
economy on purchasing power parity (PPP).

A study last year by the International Comparison Program (ICP) projected that China would
overtake the United States in 2014 based on PPP, which measures GDP in terms of prices of the same goods between nations.

“The National Bureau of Statistics does not countenance these claims by some scholars and media organisations,” said Ma Jiantang head of China’s National Bureau of Statistics (NBS) while releasing China’s annual Gross Domestic Product figures here Tuesday.

Purchasing power parity takes into account the purchasing power of a currency rather than market exchange rates. It is a component of some economic theories and is a technique used to determine the relative value of different currencies.

Roughly, we say that how many family cars, Big Mac’s, units of electricity or university education can one person’s salary buy in one nation, as opposed to another person’s salary in a different country. “The NBS also took part in the study, which established PPP for different countries, but we need to be cautious in applying the study results,” he said.

“For various reasons, we think the purchasing power parity methodology might have underestimated actual price levels in China and over-estimated China’s GDP. With that provision, we don’t agree with the results,” he said.

Despite a continuously growing economy, it should be noted that China remains a developing country with a population of 1.3 billion, which means per capita GDP is still very low, he said. Latest data released by the NBS showed the Chinese economy slowed down to 7.4 per cent year on year to 63.65 trillion yuan ($10.4 trillion) in 2014, slowest in 24 years.
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