China Overtakes U.S. As World’s Largest Economy
China has surpassed the U.S. as the world's largest economy, with the latter falling behind for the first time in nearly 150 years, according to the latest figures posted by the International Monetary Fund (IMF).
The U.S. has been, for the longest time, the leader in world economy. The latest IMF figures show China will surpass the U.S. with 16.48 percent or US$17.6 trillion purchasing-power adjusted GDP by the end of this year, while U.S. will finish 2014 with slightly less: 16.28 percent or about US$17.416 trillion.
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The said forecasts are based on the IMF's use of purchasing power parity (PPP). This measures the relative costs of living in a country and not the country's actual domestic product (GDP), the International Business Times said.
For starters, PPP considers the differences in the prices of goods and services per economy. Thus, a worker in China may earn a lot less than an employee in the U.S., but may still be able to buy more because of the purchasing power of his monthly wages.
PPP is recognized as a more reasonable way of measuring the size of economies instead of the unstable exchange rates that often do not truly reflect the true costs of services and goods in specific countries, Reuters reported.
In terms of sheer economic output, however, the U.S. remains the undisputed world economic leader, dwarfing China's US $10.4 trillion with its annual output of US$16.8 trillion, according to The Huffington Post.
This means that the average earnings of an ordinary person in the U.S. is US$55,000 compared to a Chinese employee's annual average of US$8,000, the report explained.
In Shanghai, US$8,000 could go a lot farther than it will in San Francisco because the costs of living in the latter are relatively more expensive.
The news apparently is an embarrassment to U.S. President Barack Obama, who had before him 142 years of U.S. economic supremacy, according to the Daily Mail.
China, on the other hand, is still expected to grow in the coming years, while the United States faces a slow economic lift-off as it comes fresh from 2008's recession, IMF said yesterday.