China denies becoming world’s largest economy on PPP terms

By: | Published: January 20, 2015 10:04 PM

China today refuted claims that it has overtaken the United States as the world's largest economy on purchasing power parity (PPP).

China, China economy, China growthChina today refuted claims that it has overtaken the United States as the world’s largest economy on purchasing power parity (PPP). (Reuters)

China today refuted claims that it has overtaken the United States as the world’s largest economy on purchasing power parity (PPP).

A study last year by the International Comparison Program (ICP) projected that China would overtake the US in 2014 based on PPP, which measures GDP in terms of prices of the same goods between nations.

“The NBS does not countenance these claims by some scholars and media organisations,” said Ma Jiantang head of China’s National Bureau of Statistics (NBS) while releasing China’s annual GDP figures here today.

PPP takes into account the purchasing power of a currency rather than market exchange rates. It is a component of some economic theories and is a technique used to determine the relative value of different currencies.

Roughly, we say that how many family cars, Big Mac’s, units of electricity or university education can one person’s salary buy in one nation, as opposed to another person’s salary in a different country.

“The NBS also took part in the study, which established PPP for different countries, but we need to be cautious in applying the study results,” he said.

“For various reasons, we think the PPP methodology might have underestimated actual price levels in China and over-estimated China’s GDP. With that provision, we don’t agree with the results,” he said.

Despite a continuously growing economy, it should be noted that China remains a developing country with a population of 1.3 billion, which means per capita GDP is still very low, he said.

Latest data released by the NBS showed the Chinese economy slowed down to 7.4 per cent year on year to 63.65 trillion yuan (USD 10.4 trillion) in 2014, slowest in 24 years.

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