Saturday - November 17, 2007
Chinese Economy Not As Big as Previously Thought
In previous articles, we here at The Virtuous Republic, have eschewed the PPP (purchase power parity) numbers and instead focused on GDP (see this article). The leftist elites around the world and in the U.S. have been almost crowing with glee that estimates have shown the Chinese economy becoming larger than that of America by 2012. We of course, couldn't see how an economy 5.2 times smaller in GDP could be surpassing the U.S. anytime soon, well, unless it was in terms of pollution.
It turns out, and the America haters might want to sit down for this, that China's economy really isn't as big as the lovers of all things undemocratic and anti-American wanted to believe.
In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China's economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China's size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China's economy will turn out to be 40 per cent smaller than previously stated.
This more accurate picture of China clarifies why Beijing concentrates so heavily on domestic priorities such as growth, public investment, pollution control and poverty reduction. The number of people in China living below the World Bank's dollar-a-day poverty line is 300m - three times larger than currently estimated.
Why such a large revision in the estimates of China's economic condition? Until recently, China had never participated in the careful price surveys needed to convert accurately its gross domestic product into PPP dollars.
The World Bank's estimates based on summary data from the late 1980s probably overstated China's PPP gross domestic product even then. Up to now, the bank has revised its estimate very little. In the meantime, China has repeatedly raised the prices of food, housing, healthcare and a range of other non-traded goods and services. These reforms should have lowered the PPP adjustment, but the bank left it basically unchanged. Read more....
What does this mean to the U.S.? For all the "Free Traders", it means that the U.S. still has a great amount of leverage on the imbalance of trade problem that exists between Washington and Beijing. China needs us more than we need their third world goods. Of course that would require leadership that understands the implications of a large trade deficit with an enemy communist nation.
Of course, anyone with any common sense understands that China isn't interested in free trade, but rather is engaged in economic nationalism with America as its court fool.
“There is clearly a growing economic nationalism in China that is leading to discrimination against foreign investors in pillar sectors of the economy,” said Myron Brilliant, vice president for Asia at the United States Chamber of Commerce. “It’s not only a threat to foreign investors but it also undermines China’s transition to a market-based economy.”
The Chinese actions and the administration’s concerns threaten to roil the atmosphere when Mr. Paulson goes to China in early December with other cabinet members in another round of the “strategic economic dialogue” that he began in September 2006. After seeking to defuse lingering trade disputes with China for the last 15 months, Mr. Paulson instead may have to tamp down fresh outbreaks.
“I can’t tell you how many companies have come up to me — software, chemicals, autos — who say they’re concerned about the trend,” said a senior administration official, speaking anonymously to avoid antagonizing the Chinese. “We’re very troubled about the long-term direction on some of these policies.”
The American concerns are shared in Europe, which like the United States, is growing more upset about the trade deficit with China.
“What we’re seeing are growing industrial interests lobbying state authorities in China and giving them preferential treatment,” Peter Mandelson, the top trade envoy of the European Union, said in an interview. “The result is clear discrimination against foreign companies.”
Trackposted to Stop the ACLU, Big Dog's Weblog, Dumb Ox Daily News, Stageleft, and The World According to Carl, thanks to Linkfest Haven Deluxe. Author: The Machiavellian
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