Thursday, December 20, 2007

Economists divided over World Bank data on China's output

New calculations by the World Bank, suggesting that the Chinese economy may not be as large as previously thought, are setting off a debate among economists over whether the calculations are accurate and what they should mean for the West's currency policies toward China.

The World Bank issued preliminary figures Monday that recalculated what would be the economic output of 146 countries - including China - after excluding differences in domestic prices and currencies.

The so-called purchasing power parity calculations, which compare the buying power of citizens around the world, showed that China's output was 40 percent smaller than previous World Bank estimates.

The World Bank had previously calculated China's output was worth $8.8 billion in 2005 at purchasing power parity. It was revised this week to $5.3 billion.

China's economic output in 2005 was worth $2.24 trillion at market exchange rates, the calculation most commonly used and the best indicator of a country's output of internationally traded products, from oil to steel to computers. Purchasing power parity figures are often a better indicator of living standards, however.

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