China Surpasses Germany as Third Largest Economy

[Le_Scientifique]

And this is extremely intersting concering Chinese PPP.

From http://taraqee.wordpress.com/2008/02...obal-ppp-data/

At least Quote the whole article

In order to make inter-country comparisons, GDP has to be expressed in a common currency. The use of market exchange rates as conversion factors can give very misleading results, mainly because they do not adequately reflect relative price differences.

[Le_Scientifique]

Bad example. Salt is an internationally traded commodity. If the Chinese costs is 1/3 of the American costs, then the American mine would be shut down.

It is only as an example and you know it. I could have said a "puppet factory" or whatever else. And I didn't talk about price of exploitation but about price of construction.

The fact is that labor is cheaper in China, so are accountable services and logistic costs.

Does the GDP reflect that ? No.
PPP is already better.

[Officer of Engineers]

Did not need to as my point is that no government and no bank will ever make policy based upon PPP. They will do so on the basis of GDP because $1GDP is still worth $1.

[Le_Scientifique]

Did not need to as my point is that no government and no bank will ever make policy based upon PPP. They will do so on the basis of GDP because $1GDP is still worth $1.

World Bank already does

http://web.worldbank.org/WBSITE/EXTE...270065,00.html

PPP is used as an international comparaison while GDP is Domestic

[Officer of Engineers]

It is only as an example and you know it. I could have said a "puppet factory" or whatever else. And I didn't talk about price of exploitation but about price of construction

So, you need to find things that are not translatable, ie real estate costs and services, haircuts for instances. Once you cross that spectrum of translatable products, is puppets or salt, then PPP goes out the window. And the only reason why Chinese pork chops are not translatable is because nobody trusts their safety procedures.

[Officer of Engineers]

World Bank already does

http://web.worldbank.org/WBSITE/EXTE...270065,00.html

PPP is used as an international comparaison while GDP is Domestic

Comparison, not fiscal policies.

[Le_Scientifique]

Comparison, not fiscal policies.

Let's say we both learned from that debate :)

[Le_Scientifique]

So, you need to find things that are not translatable, ie real estate costs and services, haircuts for instances. Once you cross that spectrum of translatable products, is puppets or salt, then PPP goes out the window. And the only reason why Chinese pork chops are not translatable is because nobody trusts their safety procedures.

PPP effect doesn't limit itself to the basket of goods used to determine it.

The fact that labor is cheap in china lower it's nominal GDP.
The fact that this cheap labor can buy more good and services in China with less money than in the US raise it's GDP (PPP).

If a Chinese worker gets $1 equivalent yuan for (x) time of work but he can buy $2.5 equivalent yuan of goods with it, the nominal GDP will simply express that this worker get $1, that's it. The PPP will actually try to reflect the reality with more precision, even if not perfectly.

Those are just macro tools afterall.

[Ironduke]

PPP effect doesn't limit itself to the basket of goods used to determine it.

The fact that labor is cheap in china lower it's nominal GDP.
The fact that this cheap labor can buy more good and services in China with less money than in the US raise it's GDP (PPP).

If a Chinese worker gets $1 equivalent yuan for (x) time of work but he can buy $2.5 equivalent yuan of goods with it, the nominal GDP will simply express that this worker get $1, that's it. The PPP will actually try to reflect the reality with more precision, even if not perfectly.

Those are just macro tools afterall.

Let's say I have $1 million in the bank, and I fly to China. Am I now worth $2.5 million, just because I'm in China? Nope.

Most manufactured products are similarly priced around the world, and all natural resources are. The Chinese can buy as many bowls of noodles as they'd like, or pay $50 for rent, or go to a barbershop and get a haircut and a massage for $2, but a gallon of gas, a computer, electronics, a comparable car, etc. are going to be similarly priced.

I live in the part of the state I originally came from for a few years after high school... houses can be had for 1/5 to 1/10 of metro area prices, but everything else costs the same.

[xizhimen]

The economy of the People's Republic of China is the second largest in the world after the U.S with a GDP of $7.1 trillion (2007) when measured on a purchasing power parity (PPP) basis. It is the third largest in the world after the U.S and Japan with a nominal GDP of US$3.5 trillion (2007) when measured in exchange-rate terms.

i think it is safe to say that china will overtake japan in gdp in 2 years/

[Le_Scientifique]

Let's say I have $1 million in the bank, and I fly to China. Am I now worth $2.5 million, just because I'm in China? Nope.

Most manufactured products are similarly priced around the world, and all natural resources are. The Chinese can buy as many bowls of noodles as they'd like, or pay $50 for rent, or go to a barbershop and get a haircut and a massage for $2, but a gallon of gas, a computer, electronics, a comparable car, etc. are going to be similarly priced.
I live in the part of the state I originally came from for a few years after high school... houses can be had for 1/5 to 1/10 of metro area prices, but everything else costs the same.

That's where you are mistaken. Even if crude oil price is the same all around the world, the price for a gallon of gas may vary greatly from a place to another, even inside countries. In Saudi Arabia the price of the gas is ridiculously low. In Japan you will get electronics at much cheaper price than in the USA. A Mercedez-Benz is cheaper in Germany than in North America, ect.

To calculate the PPP they use a basket of goods of over 3000 items going from a pound of tuna to a blu ray player.

Actually, if you just visit a Wal-Mart in Canada you will see that each products are a little bit more expensive (once you convert the currency) in Canada than in the USA. Gas is also more expensive. Brand new cars are more expensive, ect.
GDP (PPP) of Canada is lower than nominal GDP. What does it mean ? For each USD-equivalent CAD a canadian spend, he will get less goods and services than it'S US counterpart.

[shutemibawlz]

PPP is just one more analytical tool in your tool box, depending on the problem you want to solve. It is price biased. The poorer the place, the richer they seem. What if you change the currency in your PPP comparison to RMB, wouldn't Americans be an order of magnitude richer instantly since they have more buying powers on Chinese domestic goods and services? Why would you choose only US $? GDP is a very complex and evolving idea. Converting a whole GDP number to one single neat PPP figure is just oversimplifying a very complex process. If you could pinpoint which section of GDP is this and that much worth in PPP terms in comparison to other comparable economies, that would be more useful, even though I doubt the benefits is worth the efforts.

[gunnut]

PPP is only relavent when you calculate or compare per capita. It's worthless comparing nations with PPP because $1 is $1. Your PPP means nothing when buying oil on the world market. I don't care what your PPP in $ is when you want to buy my advanced weapon systems. My tank is $7 million. Show me hard currency.

[Officer of Engineers]

As our Chinese members have already shown, no one makes decisions based upon PPP but they do make national decisions based upon GDP. That alone should tell you what PPP is worth.

[WarisHell]

The real story is how 700 million people are still living pretty badly. Sure, 300 or 400 million have managed to drag themselves out of poverty, and of those, many have been more successful.

But look at the ones who are at the bottom. Is that a good thing for the PRC?

Japan didnt experience growth this way. Neither did Korea.