China has surpassed the US in terms of GDP based on purchasing power parity (PPP), becoming the largest in the world by this measure, International Monetary Fund estimates show.
In 2014, China reached $17.6 trillion or 16.48% of the world’s purchasing-power-adjusted GDP, while the US made slightly less, 16.28% or $17.4 trillion, several international media reported citing IMF data.
PPP is recognised as the best way to compare the size of economies rather than using volatile exchange rates, which rarely reflect the true cost of goods and services. Thus a trillion US dollars are worth a lot more in China than in the US.
However, the figure is controversial, says the Independent
On the purchasing power basis, China is overtaking the US right about now and becoming the world’s biggest economy, according to the forecast.
The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019.
According to IMF estimates, in 2015 the gap between China and the US will increase to almost a trillion dollars: Chinese GDP PPP will amount to $19.23 trillion against $18.286 trillion in the US.
However in terms of a real GDP the United States remains the undisputed world leader with $16.8 trillion output, significantly outpacing China with $10.4 trillion.
However, the figure is controversial, says the Independent.
It requires the comparison of a huge amount of goods and services, and is therefore a vast statistical undertaking that can only be conducted infrequently with estimates used during intervening periods.
The methods used to collect the data have also led to controversy in the past.
When it comes the raw GDP data base on exchange rates, China will eventually also overtake the US if it carries on growing as it has, but that is still likely to take many years.
Experts have described the toppling of America after nearly 150 years by China – even on the PPP measure – as a ‘symbolic’ moment for the global economy.
Source: Dhaka Tribune