Houston Community News >> Chinese Economy Overheated

12/18/2007 (China Daily)-- The value of the Chinese economy is overestimated by about 40%, according to a World Bank study on 146 national economies in 2005. Instead of considering the countries' gross domestic product, the World Bank used purchasing power parity, which is believed to express more accurate information about products and services - for example, because it takes into consideration the different prices that the same product has in different countries. The Chinese economy has been valued at 5.333 trillion dollars, instead of 8.819 trillion using the previous method (with a reduction of 3,486 trillion).

China is, nonetheless, the second largest economy in the world (after the United States and before Japan, Germany, and India), but with "only" 9% of worldwide productivity, compared with 14% according to the previous estimate. Japan is third, with 7% of world economic production, and India is in fifth place, with 4% instead of 6%. India had been in fourth place according to the previous method, after Japan and Germany, and almost equal to Great Britain and France. The top five countries account for almost half of global economic production.

Albert Kneidel, a well-known economist and a specialist on China, observes that this lower estimate of China's wealth "will mean there is even more of the population under the dollar-a-day poverty line than had been estimated". According to the new method, per capita income in China is 4,091 dollars per year, just 10% of earnings in the United States, where average income is 41,000 dollars per person.

But Nariman Behravesh, chief economist at the research firm Global Insight, tells the South China Morning Post that "China will continue to play a major locomotive role in the global economy. The size of [China's economy] is of small importance. What matters is the growth of China and its growing so rapidly".   

(Contributed by China Daily)