The Limits of a Smaller, Poorer China

“Purchasing power parity” is a complex economic theory that suggests identical goods cost the same in different countries and allows economists to account for the influence of exchange rates and inflation on prices. Relying on that system of measurement, an Asian Development Bank report this summer included Chinese participation in price surveys for the first time. As a result of that participation, the report revealed that China’s economy is 40 percent smaller than previously reported. The report also revealed that poverty in both India and China is more widespread than previously reported: 300 million in China and 800 million in India live on a dollar or less per day. Albert Keidel, senior associate for the Carnegie Endowment for International Peace, suggests the revised numbers on the Chinese economy offer insights into the nation’s economic motivations and how China’s rural poor would bear the brunt of any sudden reevaluation of the Chinese currency, as demanded by the US. – YaleGlobal