China’s Economy Not What It Appears To Be? Not Even Close..
This should have made the headlines but it didn’t. Albert Keidel, a senior associate at the Carnegie Endowment for International Peace and a former US Treasury official and World Bank economist, released a report that shows that China’s economy is 40 percent smaller than most recent estimates. If his figures are correct, this not only lessens the threat on America’s leadership position on trade and and the global economy, but also shows a Chinese economy that is not even close to what analysts have told us. Prior to his report, the US Government Accountability Office reported this year that China’s economy in PPP terms would be larger than the US by as early as 2012. Now it appears that that it will not overtake the United States until around 2030, if we make no changes.
China’s economy is 40 percent smaller than most recent estimates, a US economist said Wednesday, citing data from the Asian Development Bank and guidelines from the World Bank.
Albert Keidel, a senior associate at the Carnegie Endowment for International Peace and a former US Treasury official and World Bank economist, made the comments in a report published by the US think tank and in a commentary in the Financial Times.Keidel told AFP he made the calculations based on a recent ADB report that made its first analysis of China’s economy based on so-called purchasing power parity (PPP), which strips out the impact of exchange rates.
“The results tell us that when the World Bank announces its expected PPP data revisions later this year, China’s economy will turn out to be 40 percent smaller than previously stated,” Keidel wrote.
“This more accurate picture of China clarifies why Beijing concentrates so heavily on domestic priorities such as growth, public investment, pollution control and poverty reduction.”
With China rapidly attempting to adhere to International Accounting Standards, this kind of adjustment would have to come out eventually. Still, it is rather large.
If the study is confirmed by the World Bank and other international economic monitors, one suspects it will have a substantial impact on Asian stock markets…and perhaps on Chinese Government economists, as well. Unlike US bureaucrats, I doubt their mistakes are rewarded with more funding.
Keidel notes that the efforts to move people out of poverty in China and India — which Keidel also re-evaluates in this report — was much larger than first thought, and the progress made has not been as impressive as assumed. China has moved perhaps 40% of the poor as defined by the World Bank to a better standard of living over the last twenty years, but not the two-thirds most economists had assumed. Because of this, the Chinese priorities for economic development make more sense, as does its monetary policy, to which the US regularly objects.
It also means that the fears of explosive growth in Chinese military investment are probably unfounded. Their economy isn’t strong enough to fund that kind of growth, Keidel says, and it won’t be for many years. Beijing still has too much on its plate in attempting to breathe economic life into too many domestic regions to worry much about projecting military power, or to have the realistic resources to do so.
WGR:
I’ve heard about this from various sources over the past several years. China keep’s it’s economic indicators artificially high, or artificially low to suit their needs. This is nothing new – all governments do it to a degree, but none with the authority that China has used as a centralized government controlled economy.
November 18, 2007 - 07:43 PM on November 18th, 2007
Does the size of China’s economy and military have to match ours for Americans to start getting concerned ? Thanks to wide open “free trade” policies, China has become a major force in the world. If we continue these self-destructive trade policies, America simply isn’t going to remain the world’s great superpower for long.
November 18, 2007 - 07:49 PM on November 18th, 2007
1- That’s in part why I posted this. We have time to make the proper adjustments so that we are not over taken by China, or some other nation…
December 30, 2007 - 04:16 PM on December 30th, 2007
[...] in November, I posted China’s Economy Not What It Appears To Be? Not Even Close..I cited Albert Keidel, a senior associate at the Carnegie Endowment for International Peace and a [...]
February 16, 2008 - 05:26 PM on February 16th, 2008
[...] Prior to getting into that link, refresh yourself with this and this that I did a few months ago.. Bookmark to: Tags: China,, [...]