China Economy Forum

[OrionHunter]

 

[jhungary]

Umm, did the OECD assume the 1 policy relaxed on 2013 will create a baby boom in 2016, and increase the middle class in 2016?

I want to know what kind of baby become middle class welfare group at the age of 3?

 

[AirRodgers]

Well if a middle class Chinese family in 2013 consist of a man, a wife and one child, adds another child into the mix, that would mean a growth of 33% in that middle class family.. Now if all the middle class family in China were to do that wouldn't that mean a growth of 33% Among the Chinese middle class.

 

[Rainmaker]

Overtaking the US economy is nothing special. We have already overtaken the US in many areas including largest energy consumer, electricity consumer, automobile market, house appliance market, PC market, smartphone market, tablet market, manufacturing, exports, trading, etc.

By 2020, China will be the largest economy (both PPP and nominal), overall consumer, importer, luxury market, e-commerce market, direct investor, etc.

Infact by 2020, the US will be very lucky if they are ahead of China in anything. Maybe military spending, but even that is not guaranteed.

China is on the rise and there is nothing the US can do to stay ahead of China. More countries trade with China than they do with the US. By 2020 China will be a bigger investor than the US in many countries.

The Renminbi is being used for Chinese trade and investment already and this will only increase by 2020.

The days of American dominance is fast coming to an end whether they like it or not. China is one country the US will NEVER defeat economically or militarily (the US tried in the Korean War but got a pants down spanking by China).

 

[Genesis]

Well if a middle class Chinese family in 2013 consist of a man, a wife and one child, adds another child into the mix, that would mean a growth of 33% in that middle class family.. Now if all the middle class family in China were to do that wouldn't that mean a growth of 33% Among the Chinese middle class.

That's true, but all my relatives that are middle, upper middle class people are not going to have a second.

Like my parents, they know the responsibility and money required to raise another child.

In busy cities, where overtime is common and getting time off uncertain, and nannies earn more than the people who hire them, most middle class people are not going to go for the second child, or for some first child.

So who is this policy affecting? The super rich, they may go for a second, but the key word is may, not certain. This population is way too small to make a difference.

Then there is the lower class to lower middle class, they may go for it in a smaller city or village, but those people are poor, a lot may be educated, but poor non the less, so their spending power is limited and a second baby won't change much.

This assumption of one child policy being unpopular in China by the rest? It certainly is in some areas, but in the metro cities where more and more people are and more and more exist? It's actually not so much a law, as it is a way of life and a reality.

 

[AirRodgers]

If everything fall into place for China and a lot of thing fall apart in the US than the 2016 would be the date where China becomes the biggest economy in the world.. IMO that won't happen China will overtake the US in 2020 to 2022 at the latest.. At the current rate of growth China adds an India+ Pakistan+ Bangladesh to their economy every two years.

China latest reform might be good, but they also miss an opportunity to balance their economy more by introducing comprehensive government back pension plan for the avg. Chinese. If the avg. Chinese have a good government pension plan to fall back on when they retire they will save less and spend more now, there by increasing the internal consumption part of the economy.

 

[cirr]

BY BRANKO MILANOVIC

ON FRI, 07/19/2013

Is China, after a hiatus of 150 years, again the largest economy in the world? Not all sources of GDP data agree, but there is little doubt that China is either already now the largest economy, or it will, within a year, become so by overtaking that of the United States. Whichever the case may be, a long era when the American economy was the largest in the world and which began around 1860, is now reaching its end.

Data on gross domestic product (called now Gross Domestic Income) are available from three sources: the Maddison project, which is the only source for the long-run series of national GDPs, going back to 1820s; the World Bank or IMF annual data, going back to 1960; and Penn World Tables, produced periodically at the University of Pennsylvania, going back from their just-released version 8.0 to 1950 . All three sources produce GDP data in PPP (purchasing power parity) terms, which means that they adjust for differences in price levels between the countries. The easiest way to explain it is to say that PPPs try to account for each good and service using the same price for it around the world, so that a mobile phone, a kilo of rice and a haircut would each be valued the same in China as in the United States. Only thus can the real sizes of the economies, and the welfare of people, be truly comparable. These PPP data, in turn, are obtained through a massive worldwide project called the International Comparison Program, which is run every five to 10 years and collects more than 1,000 prices in all countries.

The problems, which influence our exact determination of the China-US, relative sizes of GDPs, begin after that point. The Maddison project uses PPP data derived from an earlier 1990 ICP exercise. This is in part due to the fact that Angus Maddison, the British economist who almost single-handedly created the historically comparable national income data for more than 100 countries, did his pioneering work when the 1990 ICP was the latest ICP exercise. But in addition, it was due to Madison’s dissatisfaction with the 2005 ICP results, which significantly increased the price level of China (as well as that of India, Philippines and a number of poorer Asian countries) and thus made their “real” (PPP-expressed) GDP less. Maddison thought that the estimated price levels for China were unrealistically high, and preferred to keep on using the 1990 PPPs. After his death, the same approach was carried on by a group of 20 economists, who are now managing the Maddison project (for reasons of full disclosure, I am one of them). Maddison’s Chinese GDP numbers are, therefore, as we shall see, higher than those in the other two sources. (This is somewhat ironic because Maddison was a long advocate of the position that Chinese growth rates were overestimated. In his work on China (Maddison 1998), a debate conducted on the pages of the Review of Income and Wealth (Holtz 2006; Maddison 2009), as well as in his GDP series (Maddison, 2003), he preferred to use growth rates that were, on average, several percentage points lower than the official ones.)

Now, unlike Maddison, both the World Bank and IMF, and more recently Penn World Tables, accepted the 2005 ICP results. The World Bank, one of the key players in the 2005 ICP exercise, had no choice and accepted it fully. The result was a significant shrinking of Chinese GDP, by some 40 percent. (The same fate befell a number of other countries as well: India’s GDP was reduced by about 40 percent, Bangladesh’s by an incredible 48 percent, Vietnam’s by 31 percent, and Indonesia’s by 18 percent; see Milanovic 2012, Table 1). The reason, it is argued, was that in fast-growing poor economies, prices of non-tradables (services, housing) increased faster than previously thought based on simple extrapolations of CPI, and rising price levels made “real” GDP less.

However, there was some general unhappiness with the 2005 PPP numbers for China. In their calculations of world poverty, Chen and Ravallion (2010; 2010a) decided to treat China’s PPP as pertaining to the urban areas only, and use a lower PPP level (implying thereby a higher real income) for rural areas. Angus Deaton (2010) and Deaton and Heston (2010) expressed a similar unease, arguing that the Chinese price level was overestimated by about 20 percent. The explanation was that Chinese prices in 2005 (the first time China directly participated in an ICP) were collected mostly from urban and periurban areas and thus tended to be unreasonably high. This, however, does not answer the question why other Asian countries exhibited the same phenomenon (much higher PPPs than were thought prior to 2005 ICP). Because of the importance of and fascination with China these other problems were somehow swept under the rug, and little was heard of them. Penn World Tables, which just issued its new GDP numbers, took a similar skeptical stance toward China’s 2005 ICP numbers (see Feenstra et al. 2013, p. 10), revising Chinese PPP down (compared to the ICP exercise), and thus producing China’s GDP values that are between the rather high values in Maddison, and low values in World Bank/IMF data.

This is how we have reached this confusing point where GDP of the largest, or second largest, economy in the word is not known with anything approaching certainty. But let us consider the numbers themselves. According to Maddison series, China’s 2010 (when the series ends) GDP is $PPP 10.7 trillion, and US GDP is $PPP 9.4 trillion. China overtook the US in 2009, thus ending a period that began around 1860, when US overtook….whom? China!, to become the number one world economy.

World Bank data for 2011, however, paint a different picture. Chinese GDP is estimated at almost $PPP 10 trillion (these are 2005 PPPs) and US’s at $13.2 trillion. However, between 2011 and mid-2013, China’s GDP grew by about 10 percent, while US GDP increased by 3 percent. The gap, in favor of the US, is today narrower, at most 20 percent. But clearly if the differential in growth rates continues, as according to the latest IMF World Economic Outlook(2013) it will, it would take only a couple of years for China to overtake the United States, even according to the World Bank data.

As mentioned, Penn World Tables provide numbers that are in between the World Bank’s and Maddison’s. For the United States, Penn data give almost the same value in 2011 as the World Bank, but Chinese GDP is slightly higher (remember Penn’s different treatment of 2005 PPPs) and is estimated at $PPP 10.7 trillion. According to Penn’s data, the US advantage today is less than 10 percent, and would be reduced to zero within a year and a half. Thus, with current trends, the sorpasso will happen around 2015, according to the World Bank, or around 2014, according to Penn.

But this is not the end of the story. Simultaneously with all these calculations, a subsequent ICP exercise was conducted. Its results will be available at the end of the year. If it fully confirms the results of the 2005 exercise, nothing will have changed in our relative calculations. But this, according to some preliminary findings, is unlikely. It is believed that the new ICP round will, as far as China is concerned, reverse to some extent the results of the 2005 ICP round. This would then imply that China’ GDP may suddenly jump by something like 20 percent. If indeed such results come out in December 2013, then even according to the Word Bank and Penn, which would be bound to use the new 2011 PPP numbers retrospectively, China is already now the largest economy in the world. The new results will not affect the Maddison series, but there, as we have seen, China is already number 1.

You can take your pick among these numbers. You can also lament the fact that we do not have more reliable global statistics. But whichever source you decide to trust, one conclusion is unmistakable. Short of a cataclysm in China, China is already the largest economy in the world--or will be so in 18 to 24 months. The century and a half of America as number one will have come to a close.

The end of a long era | Let's Talk Development

 

[cirr]

NOVEMBER 12, 2013

Next Month a new international price comparison study will likely boost China purchasing power parity GDP by abaout 20%

The results of the 2011 International Comparison Program (compares 1000 of prices between countries) will released at the end of 2013. It is believed that the new ICP round will, as far as China is concerned, reverse to some extent the results of the 2005 ICP round (which many believed was flawed). This would then imply that China’ GDP may suddenly jump by something like 20 percent. If indeed such results come out in December 2013, then even according to the Word Bank and Penn, which would be bound to use the new 2011 PPP numbers retrospectively, China is already now the largest economy in the world.

Data on gross domestic product (called now Gross Domestic Income) are available from three sources: the Maddison project, which is the only source for the long-run series of national GDPs, going back to 1820s; the World Bank or IMF annual data, going back to 1960; and Penn World Tables, produced periodically at the University of Pennsylvania, going back from their just-released version 8.0 to 1950 . All three sources produce GDP data in PPP (purchasing power parity) terms, which means that they adjust for differences in price levels between the countries. The easiest way to explain it is to say that PPPs try to account for each good and service using the same price for it around the world, so that a mobile phone, a kilo of rice and a haircut would each be valued the same in China as in the United States.

According to Maddison series, China’s 2010 (when the series ends) GDP is $PPP 10.7 trillion, and US GDP is $PPP 9.4 trillion. China overtook the US in 2009, thus ending a period that began around 1860, when US overtook….whom? China!, to become the number one world economy.

Several other countries that saw GDP PPP reduced in the 2005 numbers (India’s GDP was reduced by about 40 percent, Bangladesh’s by an incredible 48 percent, Vietnam’s by 31 percent, and Indonesia’s by 18 percent) could also see a recovery about about half of that loss when the 2011 numbers come out.

The GDP PPP boost will also mean that China's IMF/World bank per capita GDP PPP would not be $10,660 but about $12,800 in 2014.
China would have higher per capita GDP than Brazil in 2014 and would be around the level of South Africa in 2013. China would be around the level of Mexico and Turkey in per capita GDP PPP in 2020.

POSTED BY BRIAN WANG

Next Month a new international price comparison study will likely boost China purchasing power parity GDP by abaout 20%

 

[cirr]

World Bank to publish Purchasing Power Parities in December 2013

SUBMITTED BY FREDERIC A. VOGEL ON MON, 06/17/2013
CO-AUTHORS: NADA HAMADEH

The preliminary results from the 2011 round of the International Comparison Program (ICP) will be released in December 2013 followed by a more in-depth report in March 2014. The first release will provide Purchasing Power Parities (PPPs), price level indexes, and real expenditures for gross domestic product (GDP) and major aggregates for over 190 countries. Major economic indicators on the global economy produced by the World Bank are based on PPPs which are used to provide internationally comparable price and volume measures for GDP and its expenditure components. The same PPPs are used to determine comparable poverty levels across countries based on the $1.25 per day poverty line.

The final report in 2014 will provide an in-depth analysis of volume and per capita indexes. The ICP is a worldwide statistical initiative now involving over 150 countries and economies (plus 48 in the Eurostat-OECD PPP program) conducted on a six year interval to collect price and expenditure data for the entire range of final goods and services that comprise GDP including consumer goods and services, government services, and capital goods. The 2011 round of the ICP is leveraged on the successful outcome of the 2005 round that included 146 countries. The ICP is the largest and most complex international statistical activity in the world; therefore, several other publications have been or will be prepared to support the findings from the new results. A brief summary of each follows.

The recently published ICP book “Measuring the Real Size of the World Economy-The Framework, Methodology, and Results of the International Comparison Program” edited by the World Bank provides the most comprehensive accounting ever presented of the theory and methods underlying the estimation of PPPs. The ICP faces unique challenges in providing statistical methodology that can be carried out in practice by countries and economies differing in size, culture, statistical capabilities, and the diversity of goods and services available to their population. This book brings together a presentation of the methodology available for international price comparisons, the choices made for the 2005 ICP, the outcome of those choices, and steps taken to improve the quality of the 2011 results. By disclosing the theory, concepts, and methods underlying the estimates, the book increases the transparency of the ICP process and provides a forward-looking view of methodological developments with an eye toward improving the quality of future comparisons. The book’s authors include leading experts in the fields of economics and statistics on international comparisons.

Revisions to the ICP 2005 Benchmark results to be released in December 2013. Comparing results from ICP benchmarks is complicated by three significant factors. First, the ICP is designed to provide a one-time “snapshot” rather than a time series. Second, the collection and estimation methodologies for some components are improved between rounds. Third, additional countries are included plus others shift from one region to another. This affects comparisons between countries because the multilateral results will differ depending on the countries included. In addition, national accounts data in virtually all countries are revised over time as additional data become available. For instance, the 2005 estimates of GDP and its major components have been revised in most countries since the 2005 ICP results were released in December 2007; in the case of 22 countries, these revisions have been in excess of ten percent. Additionally, analogous problems arise with revisions to population estimates. Therefore, the 2005 benchmark results will be recomputed to reflect national accounts data revisions. In addition, a revision policy is being developed to ensure future revisions are applied transparently and consistently. The revision policy recognizes that successive ICP rounds will be treated by many users as a time series even though they are really one-time snapshots. As such, a formal revision policy is necessary to ensure the greatest possible data consistency in successive ICP rounds. Development of the revision policy is underway and will define how data will be revised as future ICP rounds generate new benchmark data.

Revisions to PPP time series for 2006-2011 published in the World Development Indicators data base.Because many data users require PPPs more frequently than every six years, the World Bank’s World Development Indicator data base provides annual PPPs obtained by extrapolating benchmark results using relative growth rates between each country and the U.S. The World Bank is working on methods to improve the extrapolation methods in order to make these results more comparable with subsequent benchmark data and consistent with the revision policy described above.

Assessment of changes in benchmark survey methodology. The ICP has a rich history beginning in 1968. Each successive round brought new and improved methodologies regarding the theory and application of price indexes. Using lessons learned from extensive analysis of the 2005 ICP results, new methods have been developed for the estimation of PPPs based on a global currency. PPPs are first computed within each of six regions and are based on prices of products commonly consumed within each region. While this method provides PPPs between countries within regions, the challenge remains to then link all regions to a common global currency. The most significant change from the 2005 benchmark was the development of a global core list of consumer products for ICP 2011. Each country priced products from the core list available to its consumers in addition to prices from its list of regional products. The within region PPPs will be converted to the global currency using PPPs based on the core product prices In addition, improvements have been made to methods used for difficult to compare components of GDP including housing rents, government compensation, health and education, and capital formation. A dilemma is that the new and improved methods affect the comparability of results between benchmarks. Therefore, an analysis describing each change in methodology and its impact on the comparability of the 2005 and 2011 results will be released in conjunction with the December release of preliminary results.

Data Access Policy. The data underlying the estimation of PPPs and real expenditures includes unpublished results for 155 basic headings and national annual average prices for thousands of products. Much of the analysis shown in the “Measuring the Real Size of the World Economy” leading to new and improved methods for the 2011 round came from the authors having access to a data file from ICP 2005 containing basic heading PPPs and expenditures for the 146 participating countries. The data access policy for ICP 2011 was expanded to include access to national annual prices where national confidentiality constraints allow. Details about the data access policy are available by visiting
http://siteresources.worldbank.org/...121120_ICPDataAccessPrinciples&Procedures.pdf

Related link: Measuring the Real Size of the World Economy-The Framework, Methodology, and Results of the International Comparison Program

World Bank to publish Purchasing Power Parities in December 2013 | Open Data

 

[ephone]

I have no doubt China will overtake US in that category this year for sure.

Sometime in early 2014, China will lay claim to leadership in yet another key global market: e-commerce.

Last year saw Chinese shoppers spend 1.3 trillion yuan ($213 billion) online, just slightly less than the $225 billion tally in the U.S. The Chinese online retailing market has grown at a scorching 71 percent compound annual growth rate since 2009, about five times as fast as its American counterpart, according to a forecast by Bain & Co.

If that trend holds, China will officially become the world’s No. 1 e-commerce market when 2013 industry statistics become available early next year. By 2015, Bain sees the Chinese market reaching $541 billion.

Bain pegs the digital penetration of China’s economy—or the value of online retail as a percentage of total retail—at 6 percent, higher than in the U.S., Japan, or Germany. Chinese shoppers love making online purchases on their phones and tablets, and smartphone use is also higher in China than the U.S. on a relative basis.

Some 8.6 percent of e-commerce transactions in China were done via mobile phones as of the end of this year’s second quarter. On Singles Day, a Chinese holiday in mid-November that’s a local twist on Valentine’s Day and the biggest online shopping day of the year, 15.3 percent of all transactions were conducted on mobile devices.

Singles Day has become an epic e-commerce event in China and is a far bigger revenue haul for Internet players than Cyber Monday in the U.S. Alibaba Group Holding, China’s largest e-commerce company, broke its one-day sales record by more than 80 percent on this year’s Singles Day, a milestone that comes ahead of an initial public offering expected sometime in 2014 that could be valued higher than Facebook. Alibaba hasn’t yet announced a timetable for the offering.

Taobao and Tmall, Alibaba’s two main e-tailing platforms, topped 35 billion yuan ($5.75 billion) in the 24-hour period, surpassing last year’s sales of 19.1 billion yuan.



Just another area China is overtaking America in

 

[cirr]

Overtaking the US economy in terms of GDP is a given，and the date might be brought forward by 1 or 2 years depending on the results of adopting SNA 2008 accounting methods。

2018 is probable，2017 possible and 2016 not impossible。

It has been politically convenient for China to understate its economic size。Now it seems the right time to rectify the situation in the names of bringing GDP calculation into line with international practice and other reforms。

 

[applesauce]

If everything fall into place for China and a lot of thing fall apart in the US than the 2016 would be the date where China becomes the biggest economy in the world.. IMO that won't happen China will overtake the US in 2020 to 2022 at the latest.. At the current rate of growth China adds an India+ Pakistan+ Bangladesh to their economy every two years.

China latest reform might be good, but they also miss an opportunity to balance their economy more by introducing comprehensive government back pension plan for the avg. Chinese. If the avg. Chinese have a good government pension plan to fall back on when they retire they will save less and spend more now, there by increasing the internal consumption part of the economy.

when they say, 2016, they mean ppp, which is entirely possible. in nominal i believe you are right, itll about 2020 or so.

and the pension/retirement plan is being worked on, Xi has given his government til 2020(interestingly about the same time china overtakes the US in nominal GDP) for the reforms to have full impact.

 

[hari sud]

China is already a world power of dollar store items, cheapest possible clothing and everything else which breaks down often.

What more they want?

That status would be soon compromised if everything I and rest of world bought thinking it is cheap and a good deal will turn away to buy durable but more expensive goods which last a long time.

 

[Fattyacids]

China is already a world power of dollar store items, cheapest possible clothing and everything else which breaks down often.

What more they want?

That status would be soon compromised if everything I and rest of world bought thinking it is cheap and a good deal will turn away to buy durable but more expensive goods which last a long time.

India is the world's largest consumer of cheapest dollar store items that we dumped. Your status will be severely compromised if China's status changed.

 

[jhungary]

Well if a middle class Chinese family in 2013 consist of a man, a wife and one child, adds another child into the mix, that would mean a growth of 33% in that middle class family.. Now if all the middle class family in China were to do that wouldn't that mean a growth of 33% Among the Chinese middle class.

First of all, not all the middle class have 1 each (one father, one mother and 1 child)

Second if you mean the middle class family then there are no change as that was the same family that have the increase, unless you trying to say the son or daughter of that middle class family branch out (either by marriage or reproduce) to form another middle class family

However, if what you mean is the middle class person, the figure would also be unchanged as it does not matter if the same middle class family have 1 or 2 or 3 son, unless their son is able to find a middle class job, the earning responsibility would still be the father and/or the mother or their original child, with a child born in 3 years of age, I hardly think they can find a middle class job at the age of 3 unless they are some kind of superbaby

Do bear in mind I am talking about the article refer to the removal of one child policy In 2013 would have an impact on middle class level in 2016, of course there will be different, it wouldn't be in 2016