China May Surpass US To Be World’s Largest Economy This Year

According to the results from the International Comparison Program (ICP) hosted by the World Bank, China has become very close to toppling USA as the world’s leading economy this year.

Change of Measurement to account for Economy Size

Previously, a country’s economy was calculated based on GDP. In 2005, ICP calculated that China’s economy was less than half the size of the US. Subsequently in 2012, the United States’ GDP was estimated at US$16.2 trillion while China’s GDP was estimated at US$8.2 trillion.

ICP recently concluded on a new methodology utilising “purchasing power parity” (PPP in short) to compare the size of economies rather than using volatile exchange rates as the latter rarely reflect the true cost of goods and services.

Due to the change in methodology and recent growth of the China’s economy, in 2011, the size of China’s economy was estimated to be 87% of the US’ economy.  The IMF calculated the growth of China’s economy to be around 24% from 2011 to 2014, and 7.6% for the US economy during the same period.

China beats all estimates

With these new estimates by ICP, it looks like China may surpass US as being the largest economy in the world this year, a lot sooner than expected by several global economists. US has previously been holding the leader’s position in world economy for the last 140 years after overtaking UK. The OECD had expected China to supersede in 2016, while China itself claims to attain the mark by 2019. The Economics and Business Research Center estimated it to be around 2028.

Companies that have been participating in China’s growth include Capitaland (SGX: C31) which has been increasingly focusing on the mainland property development and Straco (SGX: S85) which targets middle income consumers for its tourism-related businesses.

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