Economic reports on China focus far too much on total GDP and not enough on GDP per capita, which is the most telling indicator. This biased coverage has important implications, as the two indicators paint a very different picture of China’s economic and political situation. They also focus attention on different issues.
A quick search of English-speaking news agencies in the ProQuest database since 2011 shows that 20,915 articles deal with China’s GDP, while only 1,163 mention its GDP per capita. The difference was proportionately even larger among the eight largest and most elite newspapers, including the New York Times, the the Wall Street newspaper and the Washington post, of which 5,963 articles referred to Chinese GDP and only 305 dealt with per capita measurement.
In 2019, China’s GDP – measured at market exchange rates – of US $ 14 trillion was second in the world, after that of the United States ($ 21 trillion), along with Japan (5,000 billion billion dollars) in third place. Aggregate GDP reflects the total resources, including the tax base, available to a government. This is useful for thinking about the size of China’s public investment, such as in its space program or military capability, but it has much less impact on the daily lives of the Chinese.
So most economists care more about China’s GDP per capita, or income per person, than the aggregate measure.
The bottom line is that China remains a poor country, despite the phenomenal growth in its overall GDP over the past four decades.
China’s GDP per capita in 2019 was US $ 8,242, placing the country between Montenegro (US $ 8,591) and Botswana (US $ 8,093). Its GDP per capita in purchasing power parity (PPP) terms – with income adjusted for the cost of living – was US $ 16,804. This figure is lower than the global average of $ 17,811 and places China 86th in the world, between Suriname ($ 17,256) and Bosnia and Herzegovina ($ 16,289).
In contrast, per capita GDP in PPP terms in the US and the EU is US $ 65,298 and US $ 47,828, respectively.
To understand the extent of poverty in China, the degree of inequality among its large population must be taken into account. The level of income inequality in China, measured by the Gini coefficient, is similar to that of the United States and India. Since 1.4 billion people live in China, the country’s inequality means that there are still hundreds of millions of impoverished Chinese.
The Chinese government has stated that 600 million people have a monthly income of just 1,000 yuan (US $ 155), equivalent to an annual income of US $ 1,860. Of these people, 75.6% live in rural areas.
To emerge from the ranks of the world’s poorest countries, China must significantly increase the incomes of a population the size of that of sub-Saharan Africa, and with a similar average income of US $ 1,657.
The Chinese government realizes that it must do this to maintain popular support. All other things being equal, he will be concerned for at least another generation about the need to increase household incomes.
However, everything else is rarely equal in politics, and governments can also strengthen their popular support in ways that do not promote economic growth. The Chinese government, for example, emphasizes its role in defending the population against external or impersonal forces, such as earthquakes or the COVID-19 pandemic. It also recently took a strong stance on territorial disputes in the South China Sea and along the Sino-Indian border.
Western countries have reacted to these and other Chinese actions in various ways. The United States is stepping up its military presence in the South China Sea, while China is also threatened with economic sanctions and a boycott of the Beijing Winter Olympics next year over human rights concerns. the man.
Experience shows that sanctions, boycotts and military pressure are unlikely to achieve the intended objectives.
Russia, for example, has faced Western economic sanctions since 2014 – and the administration of US President Joe Biden recently announced new punitive measures – but the Kremlin has persisted in its policy of occupation in the Donbass region, in eastern Ukraine.
Likewise, the boycotts of the 1980 Moscow Olympics and the 1984 Los Angeles Games had little effect on either side of the Cold War.
On the contrary, military aggression often provokes a political reaction in the target country and builds support for its government. Economic sanctions can have similar effects and solidify public opinion behind tougher policies.
The backlash effect is easily observed in China. Many Chinese believe the West is seeking to reassert its political dominance and feel painful reminders of colonialism and World War II, when China lost 20 million people, more than any other country except China. Soviet Union. The strong emotions triggered by Western policies towards China overshadow the fact that some of China’s actions worry countries such as India, Vietnam and Indonesia, which also suffered from brutal colonial policies.
These emotional reactions also distract from important domestic issues, including the need to increase income. The poor in China, most of whom probably care little about border disputes or international sporting events, will suffer most of the collateral damage.
To engage effectively with China, other countries must remember: Contrary to first impressions, this is not an economic monolith. Behind the world’s second-largest GDP are hundreds of millions of people who just want to stop being poor.
Nancy Qian is professor of managerial economics and decision science at the Kellogg School of Management at Northwestern University and director of the China Lab.
Copyright: Project Syndicate
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