China’s economy set to overtake the US this year as world’s biggest

AFTER more than a century on top, the US is set to be overtaken by China as the world’s biggest economy this year.

CHINA is advancing rapidly to overtake the US as the biggest economy in the world.

New data shows the leader of the world economy since the 19th century could possibly losing its top spot to the Asian giant from this year.

“The United States remained the world’s largest economy (in 2011), but it was closely followed by China” once data was adjusted for comparison on a standard basis, the World Bank said.

“India was now the world’s third largest economy, moving ahead of Japan.”

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In parallel, the Organisation for Economic Cooperation and Development (OECD), grouping 34 advanced economies and analysing the same data, said that “the three largest economies in the world were the United States with 17.1 per cent (of global output), China 14.9 per cent and India 6.4 per cent.”

Growing... A laborer works in a steel factory in Qingdao, east China's Shandong province. Picture: AFP

In 2011, “OECD countries accounted for 50.0 per cent of the world’s gross domestic product” on a comparable basis, down from about 60 per cent in 2005.

“Large emerging economies, China, Brazil, India, Indonesia, Russian Federation and South Africa, accounted for about 30 per cent of global GDP in 2011, up from about 20 per cent in 2005,” the OECD said.

The World Bank published a vast study on the rankings of national wealth creation on the basis of 2011 figures.

Growing...A worker pushes a cart as he walks out from a construction site at the Central Business District in Beijing. Picture: AP

The study was carried out with several international organisations to compare national production figures in nominal terms and also after adjustment to reflect varying buying power, a method known as purchasing power parities (PPP).

Comparisons of the size of various national economies can be skewed heavily by the exchange rates used and how these change. They can also be affected by the reliability of input data.

The OECD, a policy centre for 34 advanced democracies, said that PPPs were “the relevant currency conversion rates to make international comparisons of economic activity” since they compensated for differences in price levels across countries.

Exports.. A labourer works in a textile factory in Huaibei. Picture: AFP

Gross domestic product (GDP) by the United States in 2011 amounted to $US15.533 trillion ($16.81 trillion), more than twice China’s $7.321 trillion.

But after a PPP-method adjustment, the figure for China rose to $13.495 trillion, showing it is breathing down the neck of the US, which has dominated the world economy for over a century.

The World Bank said that its PPP calculations for 2011 could not be compared directly with calculations made in 2005, but the figures nevertheless showed the speed with which China was closing the gap.

Economic spark...A worker welds steel in a factory in Huaibei. Picture: AFP

In 2005, on a PPP basis, Chinese output amounted to about 43.0 per cent of US GDP, but in 2011 this had risen to nearly 87.0 per cent, doubling its relative performance.

China has been catching up for several years, since it became a player across the global economy, and it now appears possible that in the course of this year, it will overtake the United States in terms of output on a purchasing-power basis.

International trade...Shipping containers sit near a port in Shanghai. Picture: AP

The director of French research and forecasting body Cepii, Sebastien Jean, said: “The latest data lead to the conclusion that this will probably happen from 2014, because Chinese GDP on a purchasing parity basis has been sharply revised upwards.

“The previous data had suggested that it was 28.0 per cent lower than the US figure in 2011. The new estimates for 2011 show a gap of only 13.0 per cent.”