Much ado was made in the market yesterday regarding Tuesday’s release of The Conference Board’s Global Economic Outlook. Of particular interest, especially to Yankeephobes from the schadenfreude swamps of the Left, was the finding that China may overtake the U.S. as the world’s largest economy by 2012… with may being the key auxiliary verb.
What The Conference Board said (and what was glossed over in the headlines) was China may have a larger GDP (PPP-converted) than the U.S. two years hence. That is a far cry from saying China will unseat the U.S. as the largest economy before Obama leaves office.
In nominal terms, China is far from hailing distance of the U.S. For instance, nominal GDP implies that one dollar buys as many haircuts in Los Angeles as it does in Guizhou Province. Of course, that is absurd, as prices for non-traded goods and services are going to be lower where incomes are lower. In this vein, nominal per capita GDP in the U.S. is around $46,000 per year; in China it is more like $3,700 per year.