Tags: China | United States | economy | GDP

China Poised to Overtake US as Leading Economic Power This Year

Image: China Poised to Overtake US as Leading Economic Power This Year A Chinese investor walks past an investment map showing suitable property markets for wealthy Chinese to invest in at the International Property Expo in Beijing on April 11.

By Elliot Jager   |   Thursday, 01 May 2014 06:26 AM

China's economy will probably surpass that of the United States in 2014, the Financial Times reported.

The United States has enjoyed the largest economy in the world since it displaced Britain in 1872.

The sooner-than-expected transition is partly attributable to a change in the way the ratings are calculated. The World Bank's International Comparison Program compared the real cost of living — basically, what money can buy — instead of exchange rates.

Also, the fact that China's economy has also grown faster than expected prompted analysts to re-evaluate earlier projections that China would not pull ahead of the United States until 2019.

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The U.S. gross domestic product in 2012 was $16.2 trillion compared to China's $8.2 trillion — using the new "purchasing power parity," or PPP measure. While both economies are growing, Chinese expansion between 2011 and 2014 will register at 24 percent compared to the United States at 7.6 percent.

Using the new PPP measure,  the list of top ten world economies now reads as follows: the United States, China, India, Japan, Germany, Russia, France, Brazil, United Kingdom and Italy. One change is that India moved from 10th place to No. 3.

A political consequence of the change in the way the rankings are calculated is that rising economies will want a greater say in World Bank and International Monetary Fund decision making, according to the Financial Times.

The World Bank's shift to consumption in measuring global economic trends has led it to believe that the gap between rich and poor is closing and "the world has become more equal," the FT reports.

Among the other findings of the World Bank's International Comparison Program:

— The most expensive countries are Switzerland, Norway, Bermuda, Australia and Denmark. The United States ranks 25th in this category.

— The economies with the highest GDP per capita are Qatar, Macao, China, Luxembourg, Kuwait, and Brunei.

— The poorest countries are Malawi, Mozambique, Central African Republic, Niger, Burundi, Democratic Republic of the Congo, Comoros and Liberia.

Meanwhile, for the average person, living standards in China remain far below those in the West. It will take decades for the Chinese population to enjoy the standards now available in the United States, the Financial Times reported.

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