Despite the many forecasts claiming that China is not likely to overtake the United States and become the largest economy in the world in the near future, the Asian country has just done the impossible. According to a new publication by the International Monetary Fund (IMF), China is now the world’s biggest economy.
Just a few weeks ago, a report by IHS predicted that the Chinese economy would surpass that of the U.S. in 2024, at the earliest. The IMF was also among the skeptics, stating that even by 2019, the U.S. economy will continue to be 60% bigger compared to China’s.
However, even experts make mistakes. Latest estimates made by the International Monetary Fund showed, that the Red Dragon is now the largest economy on the globe. The estimate was revealed by IMF after an adjustment of the purchasing power parity (PPP) of the two countries. This is an important method of calculation, since one item offered in China and the U.S. usually comes with a different price tag.
This means that comparing only the salaries in the two countries is not sufficient to measure the size and power of an economy. It does not give the full picture.
According to IMF, by the end of this year, China will account for 16.48% of the purchasing-power adjusted GDP in the world. That is estimated at about $17.63 trillion. The United States, on the other hand, will make up only 16.28 or nearly $17.42 trillion. Moreover, the International Monetary Fund also predicts that in just five years, the economy of the Asian country would be 20% bigger compared to that of the U.S.
Nevertheless, the United States still leads when GDP is measured in market exchange terms. Also, the North American country overtakes China in terms of the raw market value of its currency. Here, the U.S. has $6.5 trillion more to its advantage than China.