2010

China becomes the world’s second largest economic power (by GDP, in current dollar terms)

In 2010, China overtook Japan to become the world’s second largest economic power behind the United States in terms of GDP expressed in current dollar terms. The United States still ranks in first place by a large margin. In the same year, US GDP was 2.5 times greater than China’s. Note, however, that Japan’s per capita GDP was still 10 times higher than that of China.

Gaining second place was only one of a number of Chinese successes. For example: China outstripped the US in 2009 to become the world’s largest car market and, in the same year, took first place from Germany as the world’s leading exporter. In the financial area, China has the largest foreign-currency reserves (estimated at close to USD 4,000 billion in early 2014).

According to IMF estimates in 2014, Chinese GDP, no longer calculated in dollars but in purchasing power parity (PPP), outstripped that of the USA in 2014.

It should be noted that the PPP exchange rate measures the number of dollars required to purchase the same quantity of goods and services as could be purchased with a currency unit of the country concerned. PPP-expressed GDP is a complex and sometimes disputed calculation but it eliminates differences in price levels between countries and therefore provides a better comparison of the real wealth of nations.

To find out more about purchasing power parity theory, see in particular our article on the Big Mac index