Courtesy Reuters

Chinese Ghosts

By Harold Brown

To the Editor:

G. John Ikenberry propagates a misconception ("The Rise of China and the Future of the West," January/February 2008) by using GDP at purchasing power parity (PPP) to conclude that China will surpass the United States in terms of economic weight sometime around 2020. A nation's weight in the world economy is primarily exerted through imports and exports, investment and capital flows. All of these take place at currency exchange rates, not at PPP. A haircut in Wuhan may cost a dollar's worth of yuan and be worth $15 to the Chinese GDP at PPP, but its effect on the outside world's economy is nothing, at least not until China can export haircuts.

Per capita GDP at PPP is a good measure of affluence, that is, of the individual standard of living. But the appropriate measure of the potential influence of a national economy on the rest of the world is the national GDP at exchange rates. China plays a major and growing role in the global economy. But even if its remarkably high growth rate does not falter, a continued six percent gap between the United States' and China's GDP growth would still leave the Chinese economy in 2020 at about one-third the size of the U.S. economy.

HAROLD BROWN

Counselor, Center for Strategic and International Studies

This site uses cookies to improve your user experience. Click here to learn more.

Continue