beyondbrics

The balance of world economic power is shifting east to China, everyone knows. But just how soon will China overtake the US as the world’s dominant power? By 2016, as some data predict? Maybe.

The International Monetary Fund’s 2011 World Economic Outlook database includes data for China and the US showing GDP measured by purchasing power parity. Such figures have been taken as the basis for bold assertions that the Age of America is drawing to a close and that the next US president will watch it wither.

But is it true? Premature, says the IMF. Statistics are notoriously slippery things and, as the IMF explains, a lot depends on whether you measure economic size by purchasing power parity or GDP at market rates.

Measured using PPP, China will overtake the US as the world’s biggest economy by 2016, the IMF reckons. Measured in US dollars at current prices, the US retains a clear lead.

“The IMF considers that GDP in purchase-power-parity (PPP) terms is not the most appropriate measure for comparing the relative size of countries to the global economy, because PPP price levels are influenced by nontraded services, which are more relevant domestically than globally,” said an IMF spokesperson.

“The Fund believes that GDP at market rates is a more relevant comparison. Under this metric, the US is currently 130 per cent bigger than China, and will still be 70 per cent larger by 2016,” the spokesperson added.

The IMF projects US GDP in dollars will be $15.2 trillion this year while China’s will be $6.5 trillion, rising to $18.8 trillion and $11.2 trillion by 2016, meaning the US looks likely to stay the world’s top dog economically if current growth rates are maintained.

The debate continues.