That’s far sooner than economists had been expecting; the OECD estimated China would become the world’s largest economy in 2016; China itself pegged 2019 as the year it would happen. The Centre for Economics and Business Research put it as far off as 2028.
Like many estimates of GDP, the ICP data adjusts the numbers for “purchasing power parity” (PPP). Because exchange rates fluctuate constantly, measuring the actual (or “nominal”) GDP can be misleading. PPP adjusts the numbers to reflect what people in a given economy can actually afford.
In updating its numbers, the ICP found it had underestimated the purchasing power of people in developing countries. Once it adjusted the numbers for the higher purchasing power, it found China’s economy to be 87 per cent as large as the U.S.’s in 2011.
Given that China is expected to grow 24 per cent between 2011 and 2014, and the U.S. economy is expected to grow about 7.5 per cent, that would mean China will overtake the U.S. this year.
Source: huffingtonpost.com By Daniel Tencer