PPP game loaded with meaning

Then, there is the issue of size. When Britain industrialized and its urbanization rate exceeded 50 percent, the size of its population was barely 30 million. The US achieved that rate in the 1910s, when its population was barely 100 million. In contrast, when China achieved a comparable rate in 2011, its population was 1.3 billion.

Also, industrialization and urbanization tend to go hand in hand with unbalanced development and income polarization. Moreover, when the UK and the US industrialized, per capita income differences were not as steep across and within countries as they are today.

Claim of China's economic supremacy greeted with doubt

Top 10 countries with highest GDP in 2013

Because of its population, regional divergence has been particularly steep in China. In 2013, per capita GDP (PPP) was $21,400-$23,300 in Tianjin, Beijing, and Shanghai, less than $8,000 in Sichuan, Jiangxi and Anhui provinces, and less than $6,000 in Yunnan, Gansu and Guizhou provinces.

In other words, per capita income (PPP) in the poorest Chinese administrative regions is 25-30 percent relative to the more prosperous provinces and regions. That ratio, in turn, is comparable to one between the overall living standards in China relative to the US, the EU and Japan.

If it is misguided to compare entire economies on the basis of PPP and Chinese living standards remain a fraction of those in advanced economies, why are PPP figures used to compare economies?

First, the practice may be misguided, but is very much in self-interest. Take, for instance, climate change. In advanced economies, climate change is often defined in terms of aggregate economies, which downplays the fact that, on a per capita basis, advanced economies are causing much more pollution.

Second, misguided comparisons steer attention away from absolute and relative poverty in emerging economies. The World Bank measures international poverty by $1.25 (7.81 yuan) per day, which is not enough for a single meal in China, not to speak of housing or other expenditures.

Perhaps there is something inherently outrageous in major advanced economies to be increasingly concerned about poor countries becoming too prosperous, but not about rich countries being too wealthy-or too pricey even for their own good?

The author is research director of International Business at India China and America Institute (USA) and visiting fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore).

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