China GDP may surpass US by 2016, but not even Greece per capita by 2060

US doomsayers may already be planning some small celebrations around the end of 2016, when the IMF forecasts that China GDP adjusted for purchasing power parity (PPP) will surpass the $20 trillion US GDP. ย Rounding out the top 5 economies by that measure would be India, Japan, and Germany, each between 1/4 to 1/3 the GDP levels of China and the US.

chart_China_GDP_PPP

It should be noted that much of this size of China’s economy comes from the purchasing power parity calculation. ย China’s economy surpassed Japan’s by PPP in 2001, but it seemed like much bigger news when it “officially” reported a larger economy than Japan’s when measured by market exchange rates 9 years later in 2010. ย PPP is largely used to avoid allowing the much larger moves in currency markets to make it seem like foreign GDPs go up 20% one year and fall 15% the next by trying to focus on the actual increase in quality and quantity of goods and services, but I also use the ratio of PPP/Real GDP measures as a rough indicator of how cheap goods and services are in one country versus another, and sometimes even as a broad gauge of how over or undervalued a currency might be. ย According to this PPP/Real ratio, the Renminbi is becoming less undervalued than the Rupee, and the Yen and Euro are still slightly overvalued relative to the dollar.

chart_PPP_CP_GDP_ratio

Anyone who still feels like the soon to be largest economy still feels very third world will probably also point out that it is a lot easier to have a larger economy with a population almost 5 times that of economy you are comparing with. ย According to the OECD forecast below, despite the stellar growth seen over the past 10 years and forecast to continue over the next 50, China will probably still look more like Greece or Portugal on a per capita basis in 2060, and still much poorer per person than the US or UK. ย 

China GDP per capital still lower than Greece’s by 2060 as projected by OECD

India is expected to grow at a far greater rate, but still seems to be at the bottom of this forecast!