Comparing economies is an inexact science.
Art by ChatGPT
Comparing the size of countries’ economies is a popular sport, and a lot of people are very invested in the outcomes of those comparisons.
The actual reason for the discrepancy is that there are different ways of comparing GDP. The two basic measures are:
- GDP at market exchange rates, also called “nominal”
- GDP at purchasing power parity (PPP), also called “international dollars”, also called “adjusted for differences in the cost of living”
If you use the first of these measures, you see China’s GDP falling behind America’s, as in the two charts above. But if you use the second measure, you see China’s GDP already ahead of America’s, and pulling farther ahead every year (albeit at a slower rate than before 2021):
