The Chinese economy appears to be bigger, and growing faster, than previously thought—new calculation methods actually put China on a path to overtake the U.S. as the world’s leading economy by later this year.
The estimates are compiled by the International Comparison Program (ICP), hosted by the World Bank, according to the Financial Times. They “are the most authoritative estimates of what money can buy in different countries.”
Basically, new research data showed that money goes a lot further in poor countries than it used to. So this then increases emerging market economies’ relative sizes, explains the report. This is important because it is based on the actual cost of living and purchasing power parity—what they call the PPP measurement.
So using the PPP numbers, instead of basing economy levels on volatile exchange rates, the results show a totally different picture.
“With the IMF expecting China’s economy to have grown 24 percent between 2011 and 2014, while the U.S. is expected to expand only 7.6 per cent, China is likely to overtake the U.S. this year.”