How big is China’s economy? Let the Big Mac decide
Our index reckons China’s economy is bigger than the World Bank thinks
AMERICA'S ECONOMY did not exceed China in size until the 1880s, according to the Maddison Project at the University of Groningen. The two now rival each other again. Because China’s workers are 4.7 times as numerous as America’s, they need be only a fraction as productive to surpass America’s output. No fewer than 53 countries would already have a bigger GDP than America if they were as populous as China.
根据格罗宁根大学麦迪逊项目的数据，美国经济规模直到19世纪80年代才超过中国。然而，这两个国家现在又开始互相竞争了。因为中国的工人数量是美国的4.7倍，他们的生产力只需要超过美国一点点，就能超过美国的产出。如果其他国家的人口和中国一样多的话，至少会有53个国家的 GDP 已经超过了美国。
In 2019 China’s workers produced over 99trn yuan-worth of goods and services. America’s produced $21.4trn-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. That was still well short of America’s.
But 6.9 yuan stretches further in China than a dollar goes in America. One example is the McDonald’s Big Mac. It costs about 21.70 yuan in China and $5.71 in America, according to prices collected by The Economist. By that measure, 3.8 yuan buys as much as a dollar. But if that is the case, then 99trn yuan can buy as much as $26trn, and China’s economy is already considerably bigger than America’s.
Motivated by this logic, The Economist has compared the price of Big Macs around the world since 1986. The result is a rough gauge of the purchasing power of currencies. It suggests that many currencies are undervalued, relative to the dollar, on the foreign-exchange markets (see chart). A few, such as the Swiss franc, are overvalued. Lebanon’s pound was undervalued until inflation took off late last year, raising local prices even as the pound remained pegged to the dollar. The Big Mac alone jumped 38% in price.
Every few years the World Bank embarks on a vastly more systematic effort to gauge purchasing power by comparing thousands of prices across the world. The results can be startling. Its survey of prices, released six years ago, showed that China was cheaper than previously thought and its economy was therefore much larger. Based on these estimates, the IMF calculated that its GDP overtook America’s in 2014 and was 27% bigger in 2019.
Many observers, however, greeted these estimates with scepticism. In 2010 an informal survey by a reporter at Caixin, a financial magazine, noted that a number of items were dearer in Hangzhou than in its sister city Boston. (It compared apples to apples, and found that the Golden Delicious variety was 37% pricier in the Chinese city.)
The sceptics won some vindication in May when the World Bank released its latest price-comparison exercise. It discovered that things were about 17% more expensive in China, relative to America, than previously thought. At a stroke, China’s GDP fell by over $3.2trn. The estimates suggest China did not overtake America’s economy until 2016.
But are these new estimates any more robust than earlier efforts? Comparing prices across the world is fraught with difficulties. An item may be a staple in one place and a delicacy in another. The World Bank must also decide how much weight to give each item. That depends on shopping habits, which differ—partly because prices differ. It is easy to go around in circles.
So it might help to check the World Bank’s results against a cruder yardstick—like the price of a Big Mac. Our index suggests that the bank now, if anything, underestimates the buying power of China’s currency, and therefore its economic size. McDonald’s was once a symbol of America’s economic might. Now the Big Mac shows how its might is being surpassed.
That's why Americans seem to make much more money per capita wise on paper, but have trouble to make their ends meet, while Chinese make less money but still can save much of the earnings without hurting a decently comfortable life.
Big Mac index basically relates to actual purchasing power, definitely one dollar in US cant buy you much in home country as services and even local commodities are much expensive on other hand in developing countries one dollar goes a long way..
I cant find anything for one dollar decent enough to eat in USA for one dollar in India I can have decent lunch with 3 course meal beat that...
China is getting expensive though still definitely much better purchasing power locally for one dollar I can imagine
Chinese can afford being locked down for years cause saving can last us very long, A lockdown in US for 2 months will force many Americans onto the streets begging for food.
trump be all like: what does a burger know about ecomanomics! :lol:
It varies from place to place, see how cheap Xinjiang is!! I'll say people in Xinjiang can make many times less money than Beijing but still enjoy a better life than Beijingers.
Tourist shocked by cost of living and local price in Xinjiang
0.7$ a bowl of milk tea and naan bread is free, Several different kinds of naans, cheese flavor, rose flavor, onion flavor... and they are all you can eat...
couldn't agree with u more, definitely even in India one can find much more in Tier 2-4 cities in one dollar than in Tier 1-2 cities same surely true everywhere ...
I get decent pizza of 300 rupee in Tier 1 city in India
Same I used to get for 18 USD plus tip in USA
Same might be smwht better pizza I can order in Tier 3 city for 200 rupee haha
It's not just about earnings but cultural values. Chinese people work, come home and save money to invest. Americans get paid on Friday and blow it on a steak dinner, at the bar and the strip club.
That cuture is actually good for economy in some way,though not in all scenarios.
All gov tries to make their civilians splur more and more of their extra savings.
Big Mac is not a proper measurement.
Here fast foods are cheap.
Even cheaper if you use coupon from the weekly newspaper.
If following that Big Mac standard then Germany is either very poor or very rich. Or both.
The impressive chinese economy is a lie fabricated by the China for "face"
Come to China and see how is life here and what's China's infrastructure is like and then tell me they are all fake
This is what really matters now under this current situation, and this is the reason how China can largely wiped out the virus in just couples of months so successfully. US can never afford a long lockdown and that's why even the infection rate keeps breaking record, US still has to open up.
There is no massive advertising in China.
I've seen CGTN and I never see a advertising on that tv channel. Like in Cuban television, it's because they are communists countries.
Han Chinese in Taiwan are saving money so much as in PRC?
High class chinese people love to buy useless expensive and luxury things so much as the westerners or even more, but they can afford it.
我看过中国的 CGTN 电视台，但我从来没有在那个电视频道上看到过广告。古巴的电视节目也一样，这是因为他们是共产主义国家。
Advertising is everywhere in China. It's more in your face than in the West.
In the TV too?
It's everywhere. They have far less boundaries when it comes to advertising than in the west. Even in elevators, in their subways, everywhere, there is advertising non stop. It's actually annoying to me.
But in the CGTN channels television there is no advertising, no?
There is commercial television advertising in China in CGTN (former CCTV) or another channels?
Elevators, subways, etc... it's only for big cities.
They have tons of tv channels not just cgtn. That’s mainly for foreigners. Most of their other tv channels are not political and very commercialized.
CGTN is slightly better than what they had before I remember it was CCTV9 it was horrible back in the late 2000s so many Chinglish mistakes then they started hiring foreigners or folks from the Chinese diaspora
Yah thats basically it.
But they will dissuade any use of same PPP concept for Indian economy though.
Its all very selective and inconsistent by them..... they are propaganda driven, not logic driven.
China will be close to 80% of US economy by the end of 2020;nominal .
China would be the number one economy by a massive margin by PPP, it does help when facing a crisis like we are experiencing now.
But this crisis will pass and cannot be a norm forever, when the world is back to normal, it's still nominal GDP matters more when doing global trade, China is the world biggest trading nation, so care more about nominal GDP.
This is what the trump site - zerohedge - believes about trumps economy.
Prominent pro-trump Zerohedge quoted from this ShadowGvtStats to discredit Obama back in 2016, so they believe ShadowStats was valid them.
By this ShadowStats, China surpasses USA in nominal GDP years ago.
Fake Jobs Plague The U.S. Economy
Record stock market, raised by endless debt
PPP means nothing if half your population openly defecate and 25% are starving. That's the main reason we are ridiculing india. Of course we know RMB is undervalued, we are doing it deliberately to destroy Western industrial base just like what the Japs did.
Sometimes I really wonder what US still has besides their massively bloated stock market, US doesn't have much heavy industries left, heavy industries still produce steel and other essential material to support all other industries, US has little manufacturing and the infrastructure, public facilities of all kinds are falling apart and way behind China's, so called high tech US also vastly depends on China, without China it can not even build their 5G network... Yes US is still the biggest weapon producer but which countries are always fighting wars?
PPP GDP is usually used to measure per capita domestic purchasing power, while nominal GDP is used to measure global purchasing power and influence.
Anyway it's stupid to say a local currency is overvalued or undervalued by just looking at the PPP index.
The Swiss Franc for example is strong relative to the USD, but it doesn't mean that it's overvalued. The strong Franc is rooted in Switzerland's strong economic fundamentals. In fact it should appreciate even further if the government didn't squirrel away the accumulated surplus in foreign reserves.
GDP PPP, sometimes, is an illusion.
It only has some meaning in case that country can produce many things for itself. For the case of China where they can produce nearly everything, PPP has a big meaning.
For others, it only shows the country has a very large wealth gap.