China’s Real Numbers

“It’s official! Now China is the new number 1 global economic power!”

I have to admit, I was puzzled after reading that headline on a serious financial website one morning at end of last year. I simply couldn’t believe it.

So I checked the data provided by the International Monetary Fund (IMF) and it seems to be clear: Chinas gross domestic product (GDP) was 17600 billion Dollars while the US only had 17400 billion Dollars.

Later that day, during a coffee break in the office, I brought up the subject to my romanian co-workers. I was astonished that no one at the coffee table seems to be surprised – “China is the number one”, they said, “we know that for a long time”. Quickly they changed subject to local gossip, finished coffees and cigarettes and went back to work.

Did I miss something? Of course, China had an impressive growth for the last decades. But how can it be that that country of mainly cheap exports is new number one, surpassing the US with global icons like Microsoft, Apple, Google, Boeing, Facebook, Amazon, McDonald’s, Coca Cola and others?

Upon return home from the office, I started to explore the numbers again and then I found the answer to my questions.

The pure measurement of the nominal overall GDP as a comparing economic indicator is misleading big time! To compare two countries one has to look at the GDP per capita. This number shows the economic output of a country divided by the respective population.

The real numbers look like this: the GDP per capita or the economic output per person for the United States is currently 55000 Dollars, while China has one of 8200 Dollars.

So Chinas economic performance per person is still almost seven times smaller than the US and this figures were calculated before the slump in China during the past months.

Beside, China has a long way to go not only in terms of the GDP per capita – there are serious problems ahead with an almost certain negative impact on China itself and the global economy as a whole:

• huge debts of companies
• an unstable banking system
• a japanese style real estate bubble
• a shaky stock market
• the enviroment disaster
• a demographic crash looming due to the one-child-policy.

By the way, Chinas current GDP per capita of 8200 Dollars is even smaller than the one of Romania, who has a figure of about 8800 Dollars. I bet, at least this figure will surprise my coworkers next time we talk about at the coffee table.

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We remain at the cafeteria in my office. The most discussed topic there is – besides local gossip – the low salary in Romania & other South-East Europe countries compared to other european countries. What can or should be done to change that is coming up in the next chapter: http://www.theleader.ro/salary_productivity/