Chinese Economics Thread

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gadgetcool5

Senior Member
Registered Member
Matheus S said:
Exactly.

PPP GDP is a better metric than nominal GDP to measure a country's purchasing power, so to measure the different costs of living, PPP per capita GDP is still the best component to use. This applies to the military field.

But some problems with this measure may arise. The World Bank's GDP PPP takes the value of GDP, converts it into dollars, and then divides the result by a "magic index", which is a basket of products arbitrarily chosen by the bank's bureaucrats. The curious thing is that the IMF and the CIA adopt the exact same procedure, except that each one has its own basket of products.

The consequence?

When measuring the GDP of countries by Purchasing Power Parity, the three lists generated are quite different from each other. As the Wikipedia entry itself says, "As estimates and assumptions must be made, the results produced by different organizations for the same country tend to vary, sometimes substantially. PPP are estimates rather than hard facts, figures and should be used carefully."

This analytical arbitrariness causes problems in measuring PPP GDP. For example, let's say you live in mainland China and there the barber pays ¥10, while in China's biggest and richest city, shaving at a barber costs ¥50. What cost will we be based on?

I think the PPP is overestimated and cannot be used to find a real value, what you can do is take all the economic indicators and make a big picture why the IMF itself, as well as any institution of this size, show all the indicators, which people will prefer and how they will interpret this data and something else.

The PPP itself does not indicate the real value, because in a low-wage economy, the PPP tends to be overestimated, that is, it cannot be used as a REAL measure, to be a REAL unit, as some use to reach a common denominator . PPP is used together with other indicators and aggregates to have a view as a whole.

In short, PPP does not abort inflation that takes away the value of the currency's purchasing power, PPP does not abort how the exchange rate affects imports, which are very important for globalized economies, this significantly reduces the purchasing power capacity, it cannot and should not use it as a vestment to define real equivalence between 2 economies like this, randomly, without taking into account other aspects and not counting that they are totally different economies, you cannot define what has the same value in each one, not counting the exchange.

The PPP method is good to be used to measure the exchange rate that is conferred by the relative purchasing power between countries. The GDP PPP measure reflects the differences in the cost of living in different countries. The advantages of using nominal GDP numbers include that less estimation is needed, and they reflect the share of a country's inhabitants in the global economy more accurately.
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No measure of GDP is perfect. Any honest measure will admit that there are some statistical imperfections, some economic activity will escape measurement, and so on.

However, the issue is what is our best estimate, if you are going to talk about GDP. In comparing national economies, GDP (PPP) is better than GDP (nominal). Why? Because it at least partially adjusts for purchasing power which GDP (nomimal) does not attempt to do. Thus if you say it is misleading, then you would have to say GDP (nominal) is also misleading. If you say it cannot be used to compare different economies, then neither can GDP (nominal). Hence if the Guardian is going to use a GDP statistic at all, PPP is better than nominal.

The notion that "less estimation is needed" is an advantage is misleading because the reason less estimation is needed for GDP (nominal) is that it does a poorer job of accounting for relevant factors. One could for example measure a country's economy by the price of the biggest company on its stock market, in which case you would need almost no estimation, since the price is known to a precise degree. But that would obviously be an absurd measure. The amount of estimation is irrelevant to how good a measure is if it is not aiming for the right point to begin with.

It is also misleading to say that nominal GDP "reflect the share of a country's inhabitants in the global economy" more accurately, because PPP already accounts for the exchange. It is a modification of nominal GDP, which already takes into consideration the exchange rate. If a country's currency goes up between price surveys, it will increase the PPP. Simply put, there is more information that goes into PPP and that is why it is a better measure than nominal.
 
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A

AndrewS

Brigadier
Registered Member
Matheus S said:
Exactly.

PPP GDP is a better metric than nominal GDP to measure a country's purchasing power, so to measure the different costs of living, PPP per capita GDP is still the best component to use. This applies to the military field.

But some problems with this measure may arise. The World Bank's GDP PPP takes the value of GDP, converts it into dollars, and then divides the result by a "magic index", which is a basket of products arbitrarily chosen by the bank's bureaucrats. The curious thing is that the IMF and the CIA adopt the exact same procedure, except that each one has its own basket of products.

The consequence?

When measuring the GDP of countries by Purchasing Power Parity, the three lists generated are quite different from each other. As the Wikipedia entry itself says, "As estimates and assumptions must be made, the results produced by different organizations for the same country tend to vary, sometimes substantially. PPP are estimates rather than hard facts, figures and should be used carefully."

This analytical arbitrariness causes problems in measuring PPP GDP. For example, let's say you live in mainland China and there the barber pays ¥10, while in China's biggest and richest city, shaving at a barber costs ¥50. What cost will we be based on?

I think the PPP is overestimated and cannot be used to find a real value, what you can do is take all the economic indicators and make a big picture why the IMF itself, as well as any institution of this size, show all the indicators, which people will prefer and how they will interpret this data and something else.

The PPP itself does not indicate the real value, because in a low-wage economy, the PPP tends to be overestimated, that is, it cannot be used as a REAL measure, to be a REAL unit, as some use to reach a common denominator . PPP is used together with other indicators and aggregates to have a view as a whole.

In short, PPP does not abort inflation that takes away the value of the currency's purchasing power, PPP does not abort how the exchange rate affects imports, which are very important for globalized economies, this significantly reduces the purchasing power capacity, it cannot and should not use it as a vestment to define real equivalence between 2 economies like this, randomly, without taking into account other aspects and not counting that they are totally different economies, you cannot define what has the same value in each one, not counting the exchange.

The PPP method is good to be used to measure the exchange rate that is conferred by the relative purchasing power between countries. The GDP PPP measure reflects the differences in the cost of living in different countries. The advantages of using nominal GDP numbers include that less estimation is needed, and they reflect the share of a country's inhabitants in the global economy more accurately.
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We had a debate on whether to use PPP or the exchange rate previously in the Future PLAN Orbat Thread below from 2 years ago. Additional reading on the rationale for PPP below as well.

Note the producer price index (for manufacturing output) should be understated by the PPP exchange rate.
In other words, PPP overestimates the cost of Chinese equipment and supplies. The Chinese military actually gets them even cheaper.

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Future Orbat Thread

Future PLAN orbat discussion

I'll make it a new post, the Zumwalts and LCSs are - up projects, but Burke x Type 052D should be 'fair' as currently they're 'mainstays' of either navy
www.sinodefenceforum.com
 
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bajingan

bajingan

Senior Member
mossen said:
The US enjoys 'exorbitant privilege' due to having the greenback as the world's reserve currency. As such, running up massive trade deficits do not matter. Normal rules simply do not apply to the hegemon in the system.
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Ever heard of this thing called inflation? Apparently its worst in decades right now in usa

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It may not matter for the small wealthy minority who owns assets, but its a killer for the average joe and jackson on the street
How long do you think until they had enough and decides to storm the bastille and bring the guillotine?
 
O

Overbom

Brigadier
Registered Member
bajingan said:
Ever heard of this thing called inflation? Apparently its worst in decades righ
It may not matter for the small wealthy minority who owns assets, but its a killer for the average joe and jackson on the street
How long do you think until they had enough and decides to storm the bastille and bring the guillotine?
Click to expand...
Already had an attempted coup last year. This year's mid-terms are also going to be delicious. But the real thing is the 2024 presidential elections.

I just can't stop eating popcorn anticipating these 2 things happening
 
bajingan

bajingan

Senior Member
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Looks like us businesses have a different mindset than us govt lol
So much for decoupling

“I talked to CEOs of Western companies literally every day, and I will tell you that on balance, the majority of them are planning on doing more business in China over the next 10 years, not less,” Bremmer told Yahoo Finance Live. “The reason for that is simple. It's because China is on track, still to be the world's largest economy by 2030. And corporations ultimately want to be where their markets are going to be.”
 
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