China: Size Matters
IMF Blog, March 26, 2014
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Bibliographic details
- Authors: Steven Barnett
- Published: March 26, 2014
Overview and key logic
- Mongolia’s economy grew nearly 12 percent last year, the United States around 2 percent; Mongolia grew around 6 times faster than the United States, yet the United States contributed more to GDP growth—over 150 times more. Why: size matters.
- A bigger but somewhat slower growing China of the future will contribute about as much to global demand as the smaller but faster growing China of before. An economy that is twice as big can grow by ½ as much and contribute the same to global demand.
- China today is more than twice as big as it was a decade ago.
- Even with slower growth, China will continue to be an engine of global output—indeed, an even bigger engine than before.
How big is China?
- China is the world’s second largest economy.
- Based on PPP exchange rates:
- China increased from 6 percent of global output in 1995, to 15 percent last year.
- Based on market exchange rates:
- China’s share of global GDP rose from 2 percent in 1995 to 12 percent in 2013.
- Projection timing:
- China will surpass the US in 2018, based on PPP exchange rates.
- Using market exchange rates, by 2019 China’s economy would be equivalent to about 64 percent of US GDP.
China is big but not rich
- China is the world’s most populous country.
- Per person GDP:
- China: US$ 6,500
- US: US$53,100
- Even the most developed cities in China do not approach the income levels of advanced economies, indicating considerable room to grow.
- Policy objective noted: China is aiming for "higher quality, more inclusive, and more sustainable" growth.
Size matters — contribution to global demand
- Historical and projected growth rates:
- 2003-7: China averaged 11.7 percent growth.
- 2015-19 (projected): growth expected to average ‘only’ 6.8 percent.
- Contribution to global growth:
- Average contribution rises from 1.0 (2003-7) to 1.1 (2015-19) percentage points.
- Implications:
- Despite slower growth, China’s larger size means its average contribution to global growth will actually increase slightly.
- For exporters, China’s expanding market will continue to be a significant source of future customers.
- The world economy benefits most from sustainable growth in China; a slowdown to a more sustainable growth rate is welcome because it implies much higher income in the future while maintaining China’s role as an engine of global growth.
Source: China: Size Matters — Steven Barnett, March 26, 2014
Content in this bundle
- 中国：规模很重要; iMFDirect博客； Steve Barnett； 2014年3月25日
