China's economy overestimated by 40 pct: World Bank
Washington, Dec 18: India is the fifth largest economy in the world, while the Chinese economy, the second largest, is overestimated by 40 percent, according to a World Bank study that was based on each country"s purchasing power parity (PPP).
According
to
the
World
Bank
study
of
146
economies,
China
participated
in
the
survey
for
the
first
time
and
India
for
the
first
time
since
1985.
China
still
ranks
as
the
world's
second
largest
economy
with
over
nine
percent
of
world
production
using
PPP,
but
that
compared
with
14
percent
under
the
old
methodology.
Japan
ranks
third
under
the
PPP
method
with
seven
percent
of
global
output.
The study carried out by the World Bank and other partners was "the most extensive and thorough effort" to measure the relative size of 146 economies using the PPP method which strips out the effect of exchange rates, a Bank statement said.
While the economies of China and other developing countries appear larger using the PPP method compared to using market rates, the new estimates include more reliable data on goods and services in China.
The PPP method is still somewhat controversial among economists compared with the traditional market exchange rate methods.
Using market methods, Japan would be the second largest economy and China would rank behind Germany, roughly equivalent to the economies of Britain and France, according to the World Bank report.
In the study, the United States still has the world's biggest economy with 23 percent of global output. That compares with 29 percent using market rates. The study said the survey "should not be used as indicators of the under- or overvaluation of currencies."
Nariman Behravesh, chief economist at the research firm Global Insight, said the new report has only limited implications for public policy. Behravesh said the huge revision shows that PPP estimates must use a number of judgments that may be arbitrary.
ANI>