Tags: AEI | China | US | GDP

AEI: China Is Still Eating America's Dust

By    |   Friday, 02 May 2014 11:42 AM

Despite China's impressive growth, on a per capita basis, the U.S. economy is still about 100 years ahead of China, according to the American Enterprise Institute (AEI).

Part of the reason is that China has so many people that it will take a long, long time to move the needle on authentic economic progress for the populace of that nation.
Based on real GDP per capita, China's economy is nowhere close to eclipsing the United States, the AEI concludes.

"According to the International Monetary Fund, per capita GDP in China last year reached $6,747, which was a level of economic output per capita that was first reached in the U.S. back in 1882, more than 130 years ago," wrote Mark Perry, an AEI scholar and economics professor at the University of Michigan.

"Adjusting for purchasing power in China to make a more accurate comparison between output levels per capita in the U.S. and China, the IMF data show that China's per capita GDP (PPP) last year was $9,844, which was the level of economic output per person first reached in the U.S. back in 1912, more than a century ago," said Perry.

Perry acknowledged China is now the second largest economy in the world, and it's true that China will probably surpass the United States to become the world's largest economy this year based on economic output.

But again, the measure that matters most is GDP per capita, the AEI noted.

Editor's Note: Investing Secrets That Profit 96% of the Time (Free Video)

James Pethokoukis, the AEI's money and politics blogger, started the China versus U.S. economic growth debate earlier this week with a post declaring, "Any way you slice the data, China is still a much poorer nation than America."

He pointed to a Los Angeles Times article estimating that 30 million Chinese — roughly the same population as Texas — live in caves.

"Also note that within two decades or so, China will have an older population than the United States. The Middle Kingdom has become old before it has become rich. In addition to demographic problems, China is still trying to transition to a sustainable, consumer-driven growth model," Pethokoukis wrote.

Perry's conclusion is that it could take many more decades of sustained economic growth before the average Chinese enjoys the level of average per capita GDP that the average American reached more than 50 years ago.

"Before breaking out the champagne and cigars for China's status as the 'world's leading economic power,' let's keep it all in perspective!" he wrote.

Practically no one ever said economics was an exact science. The Economist estimated that based on another formula — the conversion of GDPs into a single currency at market exchange rates — China's economy is bigger than the IMF figures state, but stil 43 percent smaller than that of the United States.

CNBC weighed in with yet another kind of economic estimate from an international statistics group that concludes China's economy is in fact close to overtaking the United States.

That study from the International Comparison Program (ICP), which involves the World Bank, measures economies based on something called purchasing power parity (PPP), which is an estimate of real living costs.

Based on the ICP's PPP jargon, China's economy was number two in the world and 87 percent the size of the U.S back in 2011, while India jumped into third place ahead of Japan, CNBC reported.

Editor's Note: Investing Secrets That Profit 96% of the Time (Free Video)

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
Markets
Despite China's impressive growth, on a per capita basis, the U.S. economy is still about 100 years ahead of China, according to the American Enterprise Institute (AEI).
AEI, China, US, GDP
580
2014-42-02
Friday, 02 May 2014 11:42 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved