Friday, May 02, 2014

Demography 21: China Overtaking the US' GDP Size in 2014?

The IMF's World Economic Outlook (WEO) came out last month. I checked some numbers, particularly GDP size via Purchasing Power Parity (PPP) valuation. The top 4 are still the US, China, India, Japan, in that order. China will overtake the US by 2019, with a projected GDP size of $22.41 trillion for China and $22.09 trillion for the US.

Then there was an article from The Economist that was well-circulated yesterday. Here is the short article and the chart.

April 30th 2014

UNTIL 1890 China was the world’s largest economy, before America surpassed it. By the end of 2014 China is on track to reclaim its crown. Comparing economic output is tricky: exchange rates get in the way. Simply converting GDP from renminbi to dollars at market rates may not reflect the true cost of living. Bread and beer may be cheaper in one country than another, for example. To account for these differences, economists make adjustments based on a comparable basket of goods and services across the globe, so-called purchasing-power parity (PPP). New data released on April 30th from the International Comparison Programme, a part of the UN, calculated the cost of living in 199 countries in 2011. On this basis, China’s PPP exchange rate is now higher than economists had previously estimated using data from the previous survey in 2005: a whopping 20% higher. So China, which had been forecast to overtake America in 2019 by the IMF, will be crowned the world's pre-eminent country by the end of this year according to The Economist’s calculations. The American Century ends, and the Pacific Century begins.

Perhaps an important lesson for the US - and Japan, Germany, UK, etc. -- is that big population is an asset, not a liability. More workers and entrepreneurs; more producers and consumers. Human talent and creativity is the single most important resource in this planet. So if countries or economies cannot raise their population the natural way, then they must allow more migrants to come in. Simplify and relax the migration procedures.

Meanwhile, a Bloomberg article argued that the above data may be right, but it does not mean that China and its people are generally rich.

On a per-capita basis, the highest-income country in the world in 2011 was the oil-soaked and lightly populated Gulf monarchy of Qatar, at $146,000 per person. The U.S., as this chart shows, was No. 12, at just under $50,000.

China? China was No. 101, at a little less than $10,000 per capita. It’s not labeled on the chart, but if it were, it would appear between Serbia and Dominica.

Yes, it is not possible for China to have a per capita GDP size as big as those in the US, UK, Germany, Japan, etc. anytime soon. Maybe several decades from now, especially when the command-and-control economy is replaced by a generally free enterprise, the system that allowed the US, UK, Japan, etc. to develop more than a century ago.

But the sheer size of the population and consumers make China, along with India, Indonesia, Brazil, Pakistan, Nigeria, Philippines, etc. become a magnet for local and foreign enterpreneurs to invest in those big population countries.

That is why government-sponsored population control policies are wrong. People are assets, not liabilities. The real liabilities -- thieves (private and public), murderers, other criminals -- government should get them. That is the main reason why government was invented in the first place.

See also:
Population Control 17: China's Depopulation and RH Law, March 03, 2013 
Population Control 18: Billions of RH Services Even Without an RH law, July 28, 2013 

Demography 19: Top 30 Countries in Population by 2050, August 05, 2013 

Demography 20: Presentation at ILS, DOLE, on Population and Growth, November 19, 2013

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