China’s economy has long been catching the US, but by one measure the communist country could become the world’s biggest economy later this year.

The US has held the title of the world’s biggest economy since 1872, according to the Financial Times. However, after the financial collapse of 2008, China has been home to a quarter of the globe’s economic growth, and could now surpass the US much earlier than the end of the decade many had previously predicted, according to estimates from the World Bank’s International Comparison Program (ICP).

The measure in which the ICP report found China to soon be pulling in front of the US uses a measure called purchasing power parity (PPP). This takes into account that in developing nations such as China, the government does not need to pay its soldiers or doctors as much as in the US or UK, as their rents and costs of living are lower. This measure works well when considering the internal costs of a country, but once the country tries to spend money outside of its own economy on technology or materials, then PPP currency is of no use.

China has been quick to dismiss any claims that it will soon outgrow the US to become the world’s largest economy, possibly partly because its leaders do not want China to be seen as a threat or domineering, but also because becoming the economic leader would have ramifications for China’s lack of green targets.

On a gross domestic product (GDP) basis, the $16 trillion US economy is about double that of China, and roughly on a par with the EU.

Share.
Disclosure:

Comments are closed.