May 04 2014, 02:44 PM
Sometimes size DOES matter. China may pass the US and become the world’s most important economy this year, according to the World Bank. It would take the position the US has held since 1872.
Previous studies have suggested China could become the world's biggest economy by 2019.
Ever since the 2008 financial crisis, the Chinese economy has contributed a quarter of total global growth. Between 2011-2014, China’s economy will account for 24 percent, according to IMF estimates.
In comparison the US economy will only show an increase of 7.6 percent over the same period.
The predictions are hard to calculate as the latest estimates are based on purchasing power parity. The index attempts to assess the size of an economy based on the assumption that prices of non-tradable goods and services are a lot lower in poorer countries, says the Financial Times (FT).
The evaluation process of the service may differ, as a haircut in China may cost much less than in the US, however its quality may differ as well.
The same problem touches upon the quality of tangible goods. A DVD player bought in China may be way cheaper than a US one, however there is no warranty that it will last longer than several months. Besides US goods are sold with far more consumer protection laws, which through more scrutiny and inspection, delivers a better product.
Source
Previous studies have suggested China could become the world's biggest economy by 2019.
Ever since the 2008 financial crisis, the Chinese economy has contributed a quarter of total global growth. Between 2011-2014, China’s economy will account for 24 percent, according to IMF estimates.
In comparison the US economy will only show an increase of 7.6 percent over the same period.
The predictions are hard to calculate as the latest estimates are based on purchasing power parity. The index attempts to assess the size of an economy based on the assumption that prices of non-tradable goods and services are a lot lower in poorer countries, says the Financial Times (FT).
The evaluation process of the service may differ, as a haircut in China may cost much less than in the US, however its quality may differ as well.
The same problem touches upon the quality of tangible goods. A DVD player bought in China may be way cheaper than a US one, however there is no warranty that it will last longer than several months. Besides US goods are sold with far more consumer protection laws, which through more scrutiny and inspection, delivers a better product.
Source
