May 12th, 2014
05:45 PM ET

Is China really about to overtake the U.S.?

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By Global Public Square staff

This month, headlines declared that China could eclipse the United States as the world's biggest economy by as early as this year. But before you start lamenting the end of American dominance – the U.S's 125-year run as the world's economic leader – listen to us. America is still number one. It will be for a while. And, as it turns out, China is OK with that.

Let us explain.

A new report from the World Bank's International Comparison Program says that China is catching up to the U.S. faster than anticipated. In 2005, the ICP estimated China's economy was 43 percent the size of America's. But their latest report, which uses 2011 data, puts China's GDP at $13.5 trillion. That accounts for 87 percent of the U.S. economy, which is $15.5 trillion.

Now, given that China's economy is growing 3 times as fast, it is fair to project that China will surpass the U.S. by year end. So, are we bracing ourselves for a big power shift from West to East, for a new Pacific era?

Well, not exactly. The International Comparison Program based their rankings on a measure called purchasing power parity. PPP, as it's called, estimates the real cost of living – in other words, what money can actually buy you in each country, not how much money you have.

For instance, on average, you can buy a loaf of white bread at a market in China for $1.66. But the same would cost you about $2.39 in the United States. A Pack of Marlboro cigarettes sets you back $2.40 cents in China, but $6 in America. And utilities for an apartment in China could cost one third of a comparably sized apartment in the United States.

But using PPP as the sole metric can be problematic. While some goods and services may be cheaper in the developing world, many things cost the same whether you are in Beijing, Washington, D.C., or New Delhi.

The Wall Street Journal's Tom Wright, perhaps, puts it best: "China can't buy missiles and ships and iPhones and German cars in PPP currency. They have to pay at prevailing exchange rates."

National power is best compared on the basis of the standard measure – market exchange rates. And by that measure, the U.S. economy is still nearly twice the size of China's. In fact, by these standards, the American economy is larger than China and Japan's combined.

So, China won't regain its spot as the world's biggest economy for some time.

We say regain, by the way, because by some measures China was actually the world's largest economy as recently as 1890. Then the Industrial Revolution propelled the United States to the top ranking. Now, what that shows you is that it is possible to be very poor and technologically backward, as China was without a doubt for most of the 19th century, and still, because of sheer size, you can be counted as the world's biggest economy.

What's more, China doesn't even want to be number one right now. China's National Bureau of Statistics has expressed reservations about the World Bank's findings.

Why? Maybe because China wants to avoid the spotlight and responsibilities that come with being a rich country. The Communist Party doesn’t want to make any concessions on trade, or climate change, or any other areas as rich nations are called on to do.

Also, keep in mind that China is still a relatively poor country. When you look at per capita GDP, China doesn't rank first, second, or even 30th. On that criteria, China is behind Peru.

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Topics: China • Economy • United States • What in the World?

soundoff (183 Responses)
  1. Rick

    The US economy has been declining for years under the Democrats leadership. No innovation, massive profits for the over paid CEO's, products have declined and now we mostly provide services. Greed has driven this train over the edge.

    May 14, 2014 at 7:08 am | Reply
  2. johnnome1221

    Southeast Asian tour is arranged in order to ensure that Malaysia and the Philippines are not as strong militarily as Vietnam, and that the U.S. Navy will never lose a hegemonic role in the South China Sea or allow China to achieve parity. This is the basis of all "turn to Asia" – contain China, the purpose is frustrating the China to develop like marine superpower simultaneously in the Indian Ocean and western Pacific.

    May 14, 2014 at 7:21 am | Reply
  3. tdsd

    Of course not. Even their corporate transparency never overtook the US'.

    http://news.yahoo.com/china-russia-outrank-u-comes-170000215.html

    They have always been more transparent.

    May 14, 2014 at 7:22 am | Reply
  4. Chris mc

    Who the hell care about missiles German cars and I phones?!? I want my god damned bills to be affordable. I knew I was being fleeced by the politicians.

    May 14, 2014 at 7:58 am | Reply
  5. orange

    Let the Americans continue in their denial.

    The only choice left to America is not whether China will overtake America, but rather how hard will America's fall be.

    Keep burying your head in the sand, USA, and your fall will be precipitous indeed. And personally, the harder the US falls, the happier I am.

    May 14, 2014 at 8:08 am | Reply
    • mfh

      Laughable. Your own denial of what is about to happen just shows how ignorant you are. When the American dollar fails, which it will, it will take down the largest consumer group in the world, thus goes China and the rest of the world. Right into the crapper. Hope your ready. I am.

      May 14, 2014 at 9:07 am | Reply
    • George patton

      Good posting, orange. Thank you.

      May 14, 2014 at 11:03 am | Reply
    • Kai

      Let me guess... You've became a sovereign citizen and hate the U.S?! Have you left the country yet? I'm proud to be an American and love my country with all it's flaws and all.. Still, there is NO better place on earth to live!!!

      May 14, 2014 at 3:56 pm | Reply
    • amir jabril

      If america falls the rest of the world will be going with it genius. As we have seen with the recession of 08 when america coughs the rest of the world feels it. And it will be like that for some time to come.

      May 17, 2014 at 12:47 am | Reply
    • redflag=redbloodpatriot

      Suck it, Qink.

      June 9, 2014 at 6:51 pm | Reply
  6. JOE SHMOE

    In The seventh paragraph it should be written like Missiles, ships, iPhones, and German cars (automobiles). How it is written is missiles and ship and iPhones and German cars. If im not mistaken thats how it should be written.

    May 14, 2014 at 8:24 am | Reply
    • Easy

      Why do people feel the need to correct grammar on the internet? Wow people like you are so damn annoying. You think you show intelligence when you are actually just showing your own insecurity about your intelligence.

      October 23, 2014 at 12:56 am | Reply
  7. Brian

    Very little difference between the US government and the Chinese government. The only difference is the court system where in the US you get a legitimate trial, in China they have so many people they just find you guilty and shoot you.

    In the US, the government is owned and controlled by Corporations determining who will run for office. In China, the Communist party controls everything.

    May 14, 2014 at 8:29 am | Reply
    • Dagger64

      You must be mistaken in your comparison of the 2 governments. How is our system in the US compared to the government in China? Please elaborate? Where does the military play in this? How is China communist? Does the Central Military Commission have a say? China is an ASIAN power at this point. If and I say IF, they clean up the corrupt system (judicial, political, military, civilian, environmental) then just maybe they will overtake us. Right now China is stealing technology to keep up, and a majority of its citizens live in extreme poverty.

      May 15, 2014 at 9:32 am | Reply
      • Mikal Jalil

        FLASH UPDATE: Everything you just mentioned is exactly what the USA needs to do: "clean up the corrupt system (judicial, political, military, civilian, environmental) then just maybe they will overtake us. Right now China is stealing technology to keep up, and a majority of its citizens live in extreme poverty" And as far as stealing technology, believe me my friend, there are no bigger thieves on this earth than those in Washington, D.C. Economists say having a job may no longer be enough for self-sufficiency in today's economy. "A low-wage job supplemented with food stamps is becoming more common for the working poor," said Timothy Smeeding, an economics professor at the University of Wisconsin-Madison who specializes in income inequality. "Many of the U.S. jobs now being created are low- or minimum-wage - part-time or in areas such as retail or fast food - which means food stamp use will stay high for some time, even after unemployment improves."
        The Housing Bubble bursting, the Wall Street Elite getting super-fat off the government sponsored bailout, which would have done a hell of a lot better if every homeowner in America was given $10,000 and the list of unpardonable trespasses that the USA has imposed unfairly on its citizenry is totally atrocious and too extensive to list here.

        May 16, 2014 at 6:54 pm |
  8. Polly M.

    The fact that China's GDP is growing at a tremendous rate causes concern. Just realize, China is the largest manufacturer and supplier of all goods (clothes, shoes, electronics, and much more). But for all its productivity, China is still a country where a huge number of the population is below the poverty line. A lot of people there do not know will they be able to dinner tomorrow, or not.

    May 14, 2014 at 9:35 am | Reply
    • Joezhifu

      49 m Americans get food stamps. Super deal. China has past the hunger problem some 20 years ago.

      May 15, 2014 at 6:11 pm | Reply
      • Ambot

        You are dreaming. China's per capita income is poor #92 in the world way behind Malaysia. This means majority of China's population are poor.

        May 15, 2014 at 9:52 pm |
  9. blipzip808

    China has a long way to go, but you have to give them credit for what they have accomplished. Look at India, and China seems light years ahead. India has to control their population.

    May 14, 2014 at 7:47 pm | Reply
  10. bobhamiltonchicago

    No, Chiner has already passed the United States. In fact, the US is on an irreversible toward the middle of the developed countries of the world. The best predictor and indicator was the fact that US kids consistently placed around 28th when compared with other countries. Those were the good old days. It's sad to see that while many immigrant students speak multiple languages, American students are struggling to speak English properly. 65 years of arrogance backed by 6+ hours of watching TV every night has allowed the rest of the world to sneak up on US.

    May 15, 2014 at 9:19 pm | Reply
  11. Ashok Peer

    China is progressing economically is a matter of fact. It has become a hub of world manufacturing for utility items. Has China already surpassed or would it surpass US as the number one economy of world in three years may be not of much significance to common people of China. Poverty and limits on rights of citizens makes the quality of life there worse than that of India.

    May 18, 2014 at 12:52 am | Reply
  12. Socrates

    For the poor really doesn't matter and they are the majority. For these people the sooner it get worst the better so they will not be alone with their misery. The American economy is like a cancer patient, you have to treat them with chemotherapy constantly and it hurts. China is not the solution either, it is so corrupted as the US and its oligarchs.

    May 19, 2014 at 9:59 am | Reply
  13. Gwen

    Having recently returned from teaching in China, I have seen how the Chinese people live. Those without the big cars and fancy apartments. I have seen both. The thing that struck me most in the article was the price of the bread. I paid one time for a loaf of bread 9yuan roughly $1.44. One time is the only time I bought it. It was not good and I threw it out, never buying again. Many things in China are happening that you never read about or see on TV. The common people though are as nice and kind as any I have met in my lifetime.

    May 19, 2014 at 4:02 pm | Reply
  14. otontisch

    Many thinks cost the same in the US, China and elsewhere?? Obviously, you never visited China and other such captioned countries??

    In China, a car cost 2 or 3 times more in, any imported good even more than that

    And all Chinese statistics are manipulated. WE do not know which is there real GDP, and figures as released by HSBS and other international sources ultimately base on these tainted statistics. And China, inspite the manipulation, has the highest public indebtedness GDP wise i the major nations world

    May 21, 2014 at 4:13 pm | Reply
  15. sihle magubane

    Reblogged this on solutions?.

    May 24, 2014 at 11:48 am | Reply
  16. Steve

    Well for 125 years, America has claimed economic superiority based on the size of its economy. Now that there are about to be passed, they change the rules.;....how American. The fact that America is on the defence, should tell you everything you need to know. And it isn't just the economy, militarily China will surpass the US technologically in the next few years as well.

    For many years America has claimed that China has no Accounting transparity......lol. China doesn't have an IMF based economy. Why should they answer to the IMF. America has no business making claims like this as they aren't even accountable economically to their own people. This is equivalent to you next door neighbour claiming you are a crook because you won't divulge your complete financial situation to them. That's right....none of your business, not a member of the IMF

    June 7, 2014 at 2:39 pm | Reply
  17. guest 43445

    i was gping to read this articule but when I saw CNN... I didn`t

    June 9, 2014 at 12:42 am | Reply
  18. neblina

    It will be interesting to watch the people who scream about socialism and blather on abouthe greatest country in the world instead of taking areal look at things when China does move in front. A communist country with plenty of regulations and rules, healthcare for all, mandatory birth control rates etc etc as the strongest economy . All the things the right wingers hate. it will be interesting to see what excuses they come up with then as our large corporations keep on relocating their headquarters to other countries.

    November 8, 2014 at 7:07 pm | Reply
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