While the United States’ population is more than quadrupled by both India and China, the country has still managed to register as the largest economy in the world for more than 100 years, according to The Economist. Currently, it boasts around 16.6 percent of global GDP, depending on what criteria is being employed.
Reports began to circulate late last year that the United States was finally taking the long projected bow to China’s rapidly growing economy. However, in 2014, the Asian powerhouse registered its slowest growth in 24 years at 7.4 percent, missing its projected growth for the first time in 16 years, reported Time. Li Baodong, a Vice Foreign Minister, said that the rate reflects a changing landscape for the Chinese economy.
“China has entered a new normal of economic growth. That is to say we are going through structural adjustment and the structural adjustment is progressing steadily.”
By some estimations, China still overtook the U.S. in total GDP. Near the end of 2014, the International Monetary Fund projected that China would produce $17.6 trillion that year, ahead of the U.S.’ $17.4 trillion. That number, however, was calculated based on purchasing power parity, or PPP, which is “determined by comparing the prices of identical items in different countries… to make more accurate comparisons between two countries gross domestic product,” according to Investopedia.
While that doesn’t make them inaccurate, it does mean that the United States still hasn’t slipped behind China in every possible way to rank world’s economies. Using nominal GDP, the U.S. is still far ahead of the Chinese economy, something noted by The Wall Street Journal‘s Tom Wright when news first began to circulate that China’s economy would overtake the U.S. in 2014.
“Regular GDP power rankings are compiled by converting a country’s gross domestic product into U.S. dollars at market exchange rates. The U.S.’s economy in 2012 was valued at over $16 trillion, twice the size of China’s, according to World Bank statistics. It’s by these measures that China’s economy won’t overtake the U.S. for a decade or more… As costs are much higher in the industrialized world, especially for non-traded goods, comparisons of GDP by PPP exchange rates tend to boost the relative size of poorer nations’ economies. In essence, money goes further in the developing world.”
China might not want to get too comfortable with the slot, no matter how it’s calculated. The Economic Times reports that India will surpass China’s projected growth rate in 2016 with 6.5, compared to the 6.3 percent that the IMF has predicted for China.
[Image via David Dennis, Flickr]