RENEE MONTAGNE, host:
China's President Hu Jintao heads home today after a visit to America filled with the pageantry reserved for the most honored guest. Hu's reception in Washington befits China's new status as a global economic power. Just a few years ago, China trailed far behind the U.S. and other western countries. China's growth has been so dramatic and comes so quickly that economists are debating just how to measure its new economic might. Here's NPR's Tom Gjelten.
TOM GJELTEN: Normally we compare economies by estimating the value of what's produced in each country and then saying how much that would be in U.S. dollars. That's the gross domestic product or GDP. The U.S. GDP is about $14.6 trillion. China's about 5.7 trillion.
But Arvind Subramanian of the Peterson Institute for International Economics highlights a problem here: $5.7 trillion goes further in a developing country like China than it does in the United States.
Mr. ARVIND SUBRAMANIAN (Peterson Institute for International Economics): If you go to a developing country, say, the amount it would cost you to get a haircut or go to a doctor would be much cheaper than what it would be in the United States.
GJELTEN: So another way to compare economies is by their purchasing power: how many haircuts and doctor visits the Chinese economy could buy versus how many haircuts and doctor visits the American economy could buy.
Mr. SUBRAMANIAN: If you make that correction, which is called purchasing power correction, I find that the Chinese economy is $14.8 trillion, which is larger than the size of the American economy.
GJELTEN: China's economy, actually larger than America's. All depending on how you measure them. In fact, people suspect this, whether it's true or not. A recent survey by the Pew Research Center found that a plurality of Americans are convinced China is already the dominant economic power on the planet.
Mr. ROBERT ALIBER (Economist): We've been brainwashed.
GJELTEN: Economist Robert Aliber is an expert at international economic comparisons.
Mr. ALIBER: The general sense that China is an economic powerhouse, that's far-fetched.
GJELTEN: Aliber, a retired University of Chicago professor, agrees that according to purchasing power China's economy is bigger than its GDP figures suggest. But he points out that much of what China adds to the world economy is cheap labor. And he says China's GDP figures may actually overstate the value of its housing. On a recent trip to China, Aliber noticed that many urban apartments are unoccupied, so their value is unproven.
Mr. ALIBER: Somebody has to buy these apartments in the end or their prices will decline. And so China is at the near terminal stage of a massive housing bubble.
GJELTEN: If that bubble bursts, China's economic figures wouldn't look so good.
Stephen Roach, formerly the chief economist at Morgan Stanley, has another problem with comparing the Chinese and U.S. economies: It's apples and oranges. Going just by the numbers, he says, doesn't take into account how the U.S. and Chinese economies are just different: China has much lower per capita income.
Professor STEPHEN ROACH (Yale School of Management): The standard of living of people, the character of the GDP in terms of whether it leads to environmental degradation, pollution, widening income inequalities.
GJELTEN: On the other hand, maybe this debate over who's got the bigger - or better - economy right now misses the larger point. Roach, now a professor at the Yale School of Management, looks at the trend, and there is no room for doubt: China will pass us.
Prof. ROACH: We can pick apart the numbers and say, well, it's going to happen in 20 years, 10 years, or if we're creative in the way we recast statistics, maybe it happened yesterday. But the Chinese economy will certainly become the largest and most dominant economy in the world.
GJELTEN: Which is why President Hu got the red carpet treatment this week.
Tom Gjelten, NPR News, Washington.
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