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Editor's Note:
The writer, Mr. I. Hussain Janjua is a senior media professional and analyst having experience of research & broadcast journalism in different organisations. He is a non-resident fellow of Chengdu Institute of World Affairs (CIWA). (Email: [email protected]; twitter: @ihussainjanjua)
The world is waking up to a new reality post the devastating pandemic that brought everything to a grinding halt. You believe it or not, it is the rise of China as the undisputed new economic superpower.
Yes, No doubt about it! Using the more reliable and widely accepted yardstick, the Purchasing Power Parity (PPP), the International Monetary Fund (IMF) has determined China’s economy at $24.2 trillion compared to America’s $20.8 trillion. The PPP calculation method used by the IMF is the latest in this regard that enables you to compare how much you can buy for your money in different countries.
The economists have traditionally been using MER (market exchange rates) to calculate GDP, which doesn’t reflect the real figures --- the MER method has invited extreme suspicion because it underestimates the buying power of the currencies of many countries.
With PPP adjustment, IMF estimates China’s economic output outmanoeuvring the US’s by a huge margin, causing the CIA to switch from MER to PPP in its annual assessment of national economies. The CIA Fact book notes that “the official exchange rate measure of GDP is not an accurate measure of China’s output; GDP at purchasing power parity provides the best measure for comparing output across countries.”
According to The Economist, “In 2019 China’s workers produced over 99 trillion yuan worth of goods and services. America’s produced $21.4 trillion-worth. Since 6.9 yuan bought a dollar last year, on average, China’s GDP was worth only $14trn when converted into dollars at market rates, well short of America’s.
But 6.9 yuan stretches further in China than a dollar goes in America. One example is McDonald’s Big Mac, costing about 21.70 yuan in China and $5.71 in America.
“By that measure, 3.8 yuan buys as much as a dollar. But if that is the case, then 99 trillion yuan can buy as much as $26 trillion, and China’s economy is already considerably bigger than America’s,” The Economist adds.
China’s economy has been growing at a mind-boggling rate of around 10 percent for almost the last 30 years. The country has witnessed startling growth in every sector, with the manufacturing sector being the engine of overall resurgence. It has made unstoppable advances in its military power, building and accumulating world-class defence equipment.
Bloomberg calculations made through the IMF data also shows the proportion of worldwide growth coming from China is expected to increase from 26.8 percent in 2021 to 27.7 percent in 2025. “That’s more than 15 and 17 percentage points, respectively, higher than the US share of expected global output,” the report adds.
Indian Congress leader Shashi Tharoor also hinted at the radical changes brought about by Covid-19 in the global economic hierarchy by asking a pointed question: “Is the IMF's relocation to Beijing imminent?”
The IMF says China will be the only major economy to grow this year. It predicts that China will expand 1.9 percent in 2020, while the US would shrink by 4.3 percent. China’s growth will accelerate to 8.4 percent next year, says the IMF, compared to 3.1 percent in the United States. Challenging!
The world can no longer deny China’s superpower. It’s now the world’s most powerful economy, a fact we can no longer brush under the carpet. The country’s rise to the top was inevitable, but no one had expected it to be so swift.
Ironically, the catastrophic Covid-19 pandemic that devastated countries around the world has only made China stronger, the place, where the virus originated.
(ASIA PACIFIC DAILY)
