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January 26, 2011
CHINA'S GDP ALREADY LEADS THE U.S. -- SOME FACTS AND FIGURES
Arshad M Khan
Three decades ago almost everyone in suburbia mowed their own lawns.
You might think that was a good thing -- a vision of Norman Rockwell's
egalitarian America, and exercise too, keeping us healthy and health care
costs down -- but not according to economists, for it did not contribute a
single cent to our GDP, the altar at which they worship.
Then enterprising folks from south of the border started to arrive. They
offered such reasonable rates, for a chore no one enjoyed, they were soon
taken up. First, there were unmarked rusting pick-up trucks with
lawnmowers piled in the back. Soon, with growing-expertise other machines
were added: blowers, trimmers, cutters, spreaders and so on. The truck was
not enough; a trailer was added. As business prospered, the trailers and
trucks became newer and shinier, and proud names were emblazoned on the
sides. All of this and the lady from Eastern Europe who now comes to clean
house, or the nanny from Honduras or Poland -- unlike Mary Poppins not
from England and no magic, just hard work -- are now part of upper class
suburbia and our GDP.
In China, grandparents look after the kids when parents are at work and
suburbs haven't quite hit.
It all comes to mind because the purchasing power parity (PPP) GDP figures
from the IMF for 2010 show our GDP at $14.6 trillion and China's at $10.1
trillion. Now here lies the surprise: According to the Wang Xiaolu China
Reform Foundation and Credit Suisse (London), household income
amounting to fully a third of GDP goes unreported in China. If this is
included, it increases China's GDP to $13.4 trillion. Add the work put into it
by Grandmas and Grandpas and it is easily in the $15 trillion range
surpassing our GDP.
But wait, there is more -- as they say in those famous/infamous infomercial
ads -- experts agree the Chinese currency is undervalued by a quarter to a
third with respect to the dollar. If the Chinese would listen to the wail of our
politicians and titans of industry and revalue, their GDP would instantly
increase to a whopping $20 trillion ... far in excess of ours.
It is why the Chinese now buy more cars than any one else in the world
including us, and why everybody is trying to get a foot in their door. By the
way, if you have a Volvo or remember the MG brand, they now own both.
They would like to buy more; we don't let them but that's another story.