This one is important. Finally something about the Chinese economy that makes sense. One of my big issues has always been that the breathless economic figures just don't coincide with the realities I saw daily. If in fact the economy is fully 40% smaller than what is commonly reported, things start to make a bit more sense.
This week, it's economist Albert Keidel and his calculation that China remains poorer - far poorer - than the world thinks. China's economy, he says, will turn out to be 40-per-cent smaller than present statistics suggest.
Mr. Keidel is an authority on China's economy. He has worked in China, Japan and South Korea, serving in Beijing as a senior economist with the World Bank before joining the Office of East Asian Nations (as director) at the U.S. Treasury Department. He has worked for the Carnegie Endowment in Washington since 2004. In 1994, he wrote China: GDP Per Capita, an early stab at the complicated task of determining the size of China's economy.
Now, anticipating revised numbers from the next World Bank report on national wealth, Mr. Keidel says that official survey results indicate that the number of Chinese who live on less than $1 (U.S.) a day probably exceeds 300 million - three times as many as current calculations indicated. One Chinese in four, in other words, still lives in abject poverty.
How could China's economy remain so stunted after three decades of rapid growth? Mr. Keidel thinks that China's official statistics have been based for years on assumptions - wrong assumptions - made more than 20 years ago. For example, the World Bank estimated in 1980 that 300 million Chinese lived in dollar-a-day poverty. The real number was, in fact, closer to 500 million. Complicating the task, China has never previously permitted the World Bank price surveys that have been used to determine GDP (and purchasing power parity) in other countries.
The diminished China that Mr. Keidel describes would modify the prospect of an ascendant Communist state that will quickly overtake the United States as the world's biggest economy. The U.S. Government Accountability Office had itself calculated that China would pass the U.S. by 2012 - at least on the basis of purchasing-power GDP.
"With the corrected [purchasing power] figures," Mr. Keidel says, "the whole question is moot. China is just not that big and it will not get that big any time soon."
Even with the old numbers, China was advancing slowly - when compared with the rest of the world. Take the index that the UN uses to measure comprehensive change in living standards. The Human Development Index takes many factors beyond GDP growth into account - longevity, education, human rights. In 2001, the UN index ranked China as 87th in the world. By 2007, it had elevated China only to 81st place. In the intervening years, China scored as poorly as 104th.
Even now, China's per-capita GDP (expressed as purchasing power) varies significantly, depending upon which authority you use.
The International Monetary Fund puts it at $7,722, only a few dollars less than the Central Intelligence Agency's estimate of $7,800. At this level, China ranks 86th in the world. The University of Pennsylvania, which publishes an authoritative analysis of its own, puts the country at $5,772, pushing China down to 94th.
In either case, subtract Mr. Keidel's exaggeration factor of 40 per cent from these numbers and China slides further than it has climbed in the last few years. The IMF number becomes $5,790 and puts China in 100th place; the University of Pennsylvania number becomes $4,379 and puts China in 114th place, just above Uzbekistan.