China's GDP in U.S. Dollars Based on Purchasing Power Parity

Abstract

China's gross domestic product per capita was only US$300 to $370 in 1980-91 in an estimate based on the World Bank Atlas approach used in the World Development Report. These estimates fail to capture the fact that in the 10 years since embarking on a program of economic reform aimed at rapid economic development, China has been one of the fastest growing economies in the world. Knowing what its true standard of living and productive potential is important not only for measuring the size of China's economy but for assessing its growth performance. The authors provide a detailed comparison of the GDP of China and the United States using the purchasing power parity approach formulated by the U.N. International Comparison Program (ICP), with 1986 as a base. Using this approach, which establishes a conversion factor based on prices for comparable items rather than on exchange rates, they find that: 1) China's per capita GDP in 1986 international dollars in between $770 and $1,044, depending on assumptions made about comparison-resistant service sectors and quality adjustments made in a number of selected ones in calculating purchasing power parities; and 2) China's per capita GDP in 1991 international dollars is between $1,227 and $1,663, allowing for the impact of inflation in the United States on the purchasing power parity and growth rates in China computed from national currency GDP data in constant prices.