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Thread: China as a Third World Country

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    China as a Third World Country

    China's GDP is pretty impression. ~70% of the US's GDP. Second largest in the world.

    But what about China's per-capita GDP? By this measure China ranks 59th in the world. In Purchasing Power Parity (PPP) China ranks 73rd. That is third world status.

    This meshes with what I have long said: China is two nations- one wealthy- along the coast and major rivers. And one very poor- the rest of the nation.


    China as a Third World Country

    There is much discussion about the surging Chinese economy and the expanding international influence of China. There is no question that China’s economy has consistently expanded in the last 40 years, since the death of Mao Zedong. But Mao had created an extraordinarily poor China, based on ideology and the desire to eliminate the power of the old economic elite that was concentrated along the coast. Mao feared them as a threat to the revolution. In fact, he feared the bourgeois tendency toward wealth and comfort as a challenge to the revolution. He throttled the Chinese economy, and as a result, virtually any rational behavior by Chinese rulers would generate dramatic growth. China, with a vast potential workforce and a basically sophisticated culture, inevitably surged by shedding the malevolent and strange grip of Mao.

    Forty years later, under a reasonably rational political structure, China has surged to being one of the largest economies in the world, second only to the United States. The gap between the U.S. and China is still substantial, with China’s gross domestic product at only 70 percent of the United States’. This is of course much narrower than 40 or even 20 years ago. Still, it is a substantial gulf. But GDP represents the aggregate production of a nation, and from an aggregated point of view, China’s $14 trillion economy is a miracle.


    But it is simply not the miracle it seems to be. One measure of an economy among many is GDP, the economy as a whole. Another way to look at an economy is per capita GDP, the aggregated divided by the population. This gives a sense, imperfect but useful, of how Chinese citizens are faring compared to citizens of other countries. Looking at the economy as a whole, China is impressive. In per capita GDP, it is another matter.


    There are two ways to measure such things. One is nominal GDP, which is measured against the U.S. dollar, the world’s reserve currency. The other way to measure is purchasing power parity (PPP). This looks at the amount of housing or food that can be purchased for a fixed amount of money. On the surface this is the best way, but it suffers from two defects. One is that in a country as vast as the U.S. or China, the cost of housing or other commodities varies dramatically. Finding a single value for housing – and the myriad other data points – that includes San Francisco and Little Rock, Arkansas, can be done, if you accept that you will be way off lots of times. In addition, these are obviously manipulated for political reasons. Still, nominal GDP and PPP together gives you a good sense of the reality. In per capita nominal GDP, China is ranked 59 in the world, behind Costa Rica, Seychelles and the Maldives. In PPP terms, China is ranked 73, immediately behind Guyana and Equatorial Guinea.


    By comparison, the United States ranks fifth nominally, behind Luxembourg, Switzerland, Ireland and Norway. The U.S. is seventh in PPP terms. Per capita GDP tends to be highest in relatively small, socially and ethnically homogenous countries, built around finance or a single high-value commodity. The U.S. is large and socially and ethnically diverse, with a vastly diverse economy. Under the circumstances, ranking fifth in the world is a significant achievement.


    China’s rankings of 59 and 73, and the countries it ranks alongside, give you a very different picture of China’s status. On an aggregate basis, it is bested only by the United States. On a per capita basis, it ranks with much poorer Third World countries. So there are at least two ways to look at China: as a world-class economic power and as a Third World country.


    It is possible to be both
    Read the rest of the article at the link.
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    Quote Originally Posted by Peter1469 View Post
    That's China's competitive advantage.
    If they want to start a new factory they bring 10,000 farmers in from the country and send out 1,000 tractors.

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    Quote Originally Posted by ron View Post
    That's China's competitive advantage.
    If they want to start a new factory they bring 10,000 farmers in from the country and send out 1,000 tractors.
    That is one reason they can export at favorable rates (not the only). But they still have the per capita GDP and PPP of a 3rd world nation.

    And if the standard of living rises for the poor in China, they will lose that export price advantage. Supply chains were already leaving China prior to COVID for that reason.
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    Quote Originally Posted by Peter1469 View Post
    That is one reason they can export at favorable rates (not the only). But they still have the per capita GDP and PPP of a 3rd world nation.

    And if the standard of living rises for the poor in China, they will lose that export price advantage. Supply chains were already leaving China prior to COVID for that reason.
    Yep.

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