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Chinese economy overtakes the U.S.’s to become the largest

marketwatch.com

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Re: Chinese economy overtakes the U.S.’s to become the largest

#41

Post by velik_m »

jeroen94704 wrote: post #36

I don't really understand the fascination with nominal GDP, be it in US$ or PPP. Those numbers are heavily influenced by the size of a country's population, which according to wikipedia ranges from something like 100,000 all the way up to 1.3 billion. That's four orders of magnitude! That's like comparing a Formula 1 car and a Peugeot 107, and then deciding the guy in the Formula 1 car is a better driver because his…

I find the analogy slightly ironic, since the best driver in formula 1 is indeed determined not only by his own skill, but also on the basis of his car quality.

Re: Chinese economy overtakes the U.S.’s to become the largest

#42

Post by Tyrannosaurs »

pmontra wrote: post #17

This is a ranking about PPP. There are about five Chinese persons for every American. The sum of their income will keep getting larger and so will their economy. GDP and economic output don't automatically relate to how well people live but they do relate to the influence a country has over the world. If we care about how happy people are in their country then maybe we should look at http://www.oecdbetterlifeindex.or…

Interestingly if you put in the cliche American free market priorities (jobs, income high, safety, work life balance, environment low, everything else in the middle) the US does come out top (as opposed to high but not top on a more even measure).

The same things seems to happen if you put in the sort of priorities other countries are generally believed to hold (so put in the environment, satisfaction, work life balance and so on and the Scandinavian countries leap to the top).

So if there is any truth in the cliches, countries do seem to optimise for what is important to them. Which I guess is what you'd hope happened.

As an aside there doesn't seem to be too much you can do to stop Australia being a great place to live - they don't have a slider for "Deadly animals".

Re: Chinese economy overtakes the U.S.’s to become the largest

#43

Post by ximeng »

seanmcdirmid wrote: post #8
tomp wrote: post #2

> These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders. > PPP is the real way of co…

Frappuccinos are more expensive in Beijing than Seattle (I know, I have a habit...). Actually, many things in China are more expensive than in the states: if you want the "lower cost of living", you have to be willing to endure the "lower standard of living" that is possible in China without as much stigma as in the US. If you want a nice apartment, nice safe food, decent education for your kids, a car, medical care,…

Or fresh air.

Re: Chinese economy overtakes the U.S.’s to become the largest

#44

Post by austinz »

jeroen94704 wrote: post #36

I don't really understand the fascination with nominal GDP, be it in US$ or PPP. Those numbers are heavily influenced by the size of a country's population, which according to wikipedia ranges from something like 100,000 all the way up to 1.3 billion. That's four orders of magnitude! That's like comparing a Formula 1 car and a Peugeot 107, and then deciding the guy in the Formula 1 car is a better driver because his…

Because each set of numbers measures a different set of things. Singapore and Luxembourg may have a larger per capita GDP than the U.S. or China, but the absolute size of their economies is far too small to allow them similar amounts of military or diplomatic influence compared to the larger countries. Likewise, a small country where everyone earns a lot of money is more attractive a market for a company selling luxury goods than a country where the total GDP is thinly spread across a large but destitute population.

Re: Chinese economy overtakes the U.S.’s to become the largest

#45

Post by jvm »

tomp wrote: post #2

> These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders. > PPP is the real way of co…

> So, it's not entirely clear if China is really the biggest economy, or just by using an accounting trick called PPP GDP.

There is no objective way of measuring the size of an economy.

Imagine some hyper-simplified economies where the only asset produced is computers.

Economy A sells 1000 Apple IIs* per year at $3k each. That means it has a nominal GDP of $3m.

Economy B sells 1000 Retina Macbook Airs at $1k each, for a nominal GDP of $1m.

Which is a bigger economy? Nominal GDP says Economy A is bigger: more dollars traded hands. PPP GDP says Economy B is bigger, since Retina Macbook Airs are much more than 3x better than Apple IIs, so the value being produced is greater. But of course this also means we have to define PPP, which is extremely challenging in the context of any modern economy.

It gets even crazier:

Economy C, the government pays workers $5m total to dig unwanted ditches. Nobody gets a computer.

In terms of nominal GDP, Economy C is bigger than Economies A and B.

Re: Chinese economy overtakes the U.S.’s to become the largest

#46

Post by sneak »

pmontra wrote: post #17

This is a ranking about PPP. There are about five Chinese persons for every American. The sum of their income will keep getting larger and so will their economy. GDP and economic output don't automatically relate to how well people live but they do relate to the influence a country has over the world. If we care about how happy people are in their country then maybe we should look at http://www.oecdbetterlifeindex.or…

Or maybe we should stop moving the goalposts because this article isn't about anything per-capita and isn't titled "Chinese quality of life tops the US". It's about total economic might.

Re: Chinese economy overtakes the U.S.’s to become the largest

#47

Post by NoPiece »

jsprogrammer wrote: post #40
yarou wrote: post #31

>Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. The irony is that the US has been running up debt for decades upon decades. The US economy is equivalent to someone that has an unlimited credit line, who pays absolutely nothing while continuing to spend lavishly. This article does not bring any new information or shed any light on t…

Just curious how you think the US economy could expand without increasing debt. My understanding is that the amount of transactions occurring is dependent on the amount of money in circulation. The amount of money in circulation is directly dependent on debt through the fractional reserve banking system. Under the current system, the only way to 'grow the economy' is to increase the volume of transactions or use mone…

Money is created via debt, but the economy expands when people create things of value.

Re: Chinese economy overtakes the U.S.’s to become the largest

#48

Post by sneak »

Tyrannosaurs wrote: post #42
pmontra wrote: post #17

This is a ranking about PPP. There are about five Chinese persons for every American. The sum of their income will keep getting larger and so will their economy. GDP and economic output don't automatically relate to how well people live but they do relate to the influence a country has over the world. If we care about how happy people are in their country then maybe we should look at http://www.oecdbetterlifeindex.or…

Interestingly if you put in the cliche American free market priorities (jobs, income high, safety, work life balance, environment low, everything else in the middle) the US does come out top (as opposed to high but not top on a more even measure). The same things seems to happen if you put in the sort of priorities other countries are generally believed to hold (so put in the environment, satisfaction, work life bala…

Government surveillance would be a good slider. Commonwealth countries are notoriously short on protections for things like that.

Re: Chinese economy overtakes the U.S.’s to become the largest

#49

Post by hrktb »

fractalsea wrote: post #28
kozhevnikov wrote: post #4

Earlier quoted context omitted.

Substitute Frappuccino for a burger and it is the Big Mac index. http://www.economist.com/content/big-mac-index

In my experience this is a terrible metric. The demographics that McDonalds is marketed in different countries varies enormously. I find in Western countries it is seen as unglamorous, cheap and quick food. Whereas when I was in India, for example, it is much more expensive than cheap food you can buy there, and therefore is seen much more as a nice place to go with your family (or girlfriends/boyfriend), and it tend…

Coca cola could fit the bill

Re: Chinese economy overtakes the U.S.’s to become the largest

#50

Post by crdoconnor »

yarou wrote: post #31

>Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. The irony is that the US has been running up debt for decades upon decades. The US economy is equivalent to someone that has an unlimited credit line, who pays absolutely nothing while continuing to spend lavishly. This article does not bring any new information or shed any light on t…

>The irony is that the US has been running up debt for decades upon decades. The US economy is equivalent to someone that has an unlimited credit line, who pays absolutely nothing while continuing to spend lavishly.

There is no sensible equivalence or even comparison to be made at all since insolvency is impossible for the US government. Government debt is simply a different thing to consumer debt. Period.

>GDP, PPP, etc are metrics which have a high signal-to-noise ratio

Ironic that you should say this since GDP, PPP, inflation and the rate of government spending are all far more relevant than the overall level of government debt.

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