Does China already have the world’s largest economy? Most economists think not, and there’s a widespread guessing game as to when it will. “Sometime in the next decade” is a common answer, depending on how fast the United States — today’s No. 1 — and China grow. But some economists believe the crossover has already occurred. If so, this would be an event of huge symbolic importance, conferring at least bragging rights to China. But is it so?
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In a recent blog post, Arvind Subramanian of the Peterson Institute for International Economics argues that China passed the United States in 2010 or earlier. He says the World Bank and International Monetary Fund, which publish widely used estimates of nations’ output (gross domestic product), have vastly understated China’s economy.
What are we to make of this?
For starters, keep matters in perspective. Living standards in the United States, as measured by per capita incomes, remain much higher than in China under any of the GDP estimates. Remember that all of China’s production and income are spread over 1.34 billion people while U.S. GDP is divided among 309 million Americans. Using the official World Bank figures, U.S. per capita income totaled $47,153 in 2010, compared with China’s $7,599. Assuming a Chinese GDP of $17 trillion raises per capita income to about $12,700; that’s roughly a fourth of the U.S. level.