Thu Nov 15th, 2007 at 10:41:46 AM EST
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.[...]
The new, more accurate statistics describing a smaller, poorer China strengthen this argument. The ADB's announcement also indicates that the number of dollar-a-day poor in India is closer to 800m than the current estimate of 400m.[Carnegie Endowment]
Strangely, this comes to my attention just as Migeru and I were having an IM conversation about how nonsensical most economic measurements are.
Oh, and remember the arguments about how globalisation has lifted so many people out of poverty? Nonsense, according to this - that's 600m that were just moved back under the poverty line.