Americans may well be delighted by new figures that show China's gdp is 40% smaller than previously thought. Has the devious Beijing government been massaging the numbers, as communist planners are wont to do? Hardly. China's gdp in yuan terms remains unchanged. What has happened is that the World Bank has changed the calculations it uses to make international comparisons of the size of economies. Converting a poor country's gdp into dollars at market exchange rates can understate the true size because a dollar buys much more in an emerging market such as China than it does in America. The imf and the World Bank therefore prefer to convert gdps into dollars using purchasing-power parities (or ppps), which take account of price differences between countries.
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