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China Is Not yet Number One

Author

Listed:
  • Jeffrey Frankel

    (John F. Kennedy School of Government, Harvard University, Cambridge, MA 02138, USA)

Abstract

Many claim that China will soon overtake the US. I argue that this claim is based on a misuse of statistics. The International Comparison Program (ICP) price data is necessary to compare living standards, since a dollar's worth of yuan buys more in China than a dollar buys in the US. But the fact that rice and clothes are cheap in rural China does not make the Chinese economy larger. What matters for size in the world economy is how much a yuan can buy on world markets. Using the correct prices, the US remains the world's largest economic power by a substantial margin.

Suggested Citation

  • Jeffrey Frankel, 2015. "China Is Not yet Number One," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 10(1), pages 1-6, March.
    • Handle: RePEc:fec:journl:v:10:y:2015:i:1:p:1-6
    as

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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-004-015-0001-1
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    More about this item

    Keywords

    China; US; PPP; GDP; exchange rate;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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