China is poised to overtake the U.S. as the world’s biggest economy this year, while India has vaulted into third place, ahead of Japan, using calculations that take exchange rates into account.
China’s economy was 87 percent of the size of that of the U.S. in 2011, assessed according to so-called purchasing power parity, the International Comparison Program said in a statement in Washington yesterday.
The figures, compiled by the International Comparison Program hosted by the World Bank, are the most authoritative estimates of what money can buy in different countries and are used by most public and private sector organisations, such as the International Monetary Fund. This is the first time they have been updated since 2005.
The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019.
Changes in methodology contributed to the speed of China’s rise and India jumping to third-biggest in 2011 from 10th in 2005. Purchasing power parity seeks to compare how far money goes in each country. Using market rates, U.S. gross domestic product was $16.2 trillion in 2012, compared with China’s $8.2 trillion.
In 2005, the ICP thought China’s economy was less than half the size of the US, accounting for only 43 per cent of America’s total. Because of the new methodology – and the fact that China’s economy has grown much more quickly – the research placed China’s GDP at 87 per cent of the US in 2011.
For 2011, the report says: “The US remained the world’s largest economy, but it was closely followed by China when measured using PPPs”.
With the IMF expecting China’s economy to have grown 24 per cent between 2011 and 2014 while the US is expected to expand only 7.6 per cent, China is likely to overtake the US this year.