China’s Questionable Economic Power
The World Bank recently announced that China’s economy will surpass that of the US this year, measured according to purchasing power parity. But this is far from a holistic depiction of China's global economic standing.
TOKYO – The World Bank recently announced that China’s economy will surpass that of the United States this year, measured according to purchasing power parity (PPP). But this is far from a holistic depiction of China’s global economic standing.
Though PPP can serve some purpose in comparing welfare across countries, it is affected significantly by population size. India, the world’s tenth largest economy measured according to the market exchange rate of the US dollar and the Indian rupee, is the third largest in PPP terms. Moreover, power resources, such as the cost of imported oil or an advanced fighter aircraft engine, are better judged according to the exchange rates of the currencies that must be used to pay for them.
To be sure, total size is an important aspect of economic power. China has an attractive market and is many countries’ largest trading partner – important sources of leverage that China’s leaders are not afraid to wield.