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Why does total GDP matter so much? China has over a billion people. A much more accurate metric is GDP or even PPP GDP per capita. Only when China has 3x large

Why does total GDP matter so much? China has over a billion people. A much more accurate metric is GDP or even PPP GDP per capita. Only when China has 3x larger economy than US economy will it be of the same size per capita to the U.S.

czr80 12y ago
On a per capita basis the US is currently 10th (Qatar, Luxembourg and Singapore are the top 3).
justquest 12y ago
I like your name. I imagine, you would have signed up as legitquestion, but legitquestion was too long, correct? -justquest :)
- legitquest 12y ago
  Yes :) I signed up just to ask this one question!
tinco 12y ago
Because on the global power scale it doesn't really matter if half your population is starving or not. And if you want to compare the peoples wealth, remember the one percent rule. How much richer does the US have to be for its bottom 50% to be as wealthy as The Netherlands' bottom 50%? It's all numbers games, this number is about global economic power, the sort that could have all sorts of real (nasty) consequences.
- simonh 12y ago
  It's not at all about real global power, it's about domestic economic capacity. As soon as China tries to start exerting it's economic muscle abroad, it has to compete on international terms which means adjusting costs to take advantage of domestic costs doesn't matter anymore. For example, does China's GDP at PPP 'equality' with the US mean it can fford as many nuclear submarines as the US, as many aircraft carriers? As many advanced state of the art stealth bombers, fighters, tanks, spy satelites and naval bases? No, it doesn't, all it realy means is it can afford as many roads and bags of rice as the US. As soon as China starts investing in, developing or buying international standard technology and eqipment it has to start investing or spending international standard capital to do so, and PPP doesn't help anymore. Even in the case of 'soft power' such as financial support and investment in other countries, that has to be done in foreign currency. Suddenly the domestic purchasing power advantage of the Yuan becomes an equal and opposite disadvantage.
  - crdoconnor 12y ago
    >It's not at all about real global power, it's about domestic economic capacity. As soon as China tries to start exerting it's economic muscle abroad, it has to compete on international terms which means adjusting costs to take advantage of domestic costs doesn't matter anymore. The entire reason the GDP and PPP GDP is so out of whack in China is because it intentionally suppresses the value of its currency to subsidize its exports. >For example, does China's GDP at PPP 'equality' with the US mean it can fford as many nuclear submarines as the US, as many aircraft carriers? As many advanced state of the art stealth bombers, fighters, tanks, spy satelites and naval bases? No, it doesn't Yes it does because all of these things require domestic manufacturing capacity. It's doubly true for military hardware in fact - just as the US doesn't want its submarine parts made in China (especially chips), China doesn't want its submarine parts made in the US. >As soon as China starts investing in, developing or buying international standard technology China is becoming international standard technology. Its mercantilist strategy has paid off since it has become the manufacturing hub of the world. >Even in the case of 'soft power' such as financial support and investment in other countries, that has to be done in foreign currency. Only if the foreign country doesn't want your currency. China just started buying $400 billion in gas from Russia in RMB though, so...
    - simonh 12y ago
      > Yes it does because all of these things require domestic manufacturing capacity. But that's manufacturing capacity it doesn't have for technology is also doesn't have. To get it will either take buying it in at international prices (in $), or take take world class investment in technology, training, manufacturing capacity etc. Having cheap rice and roads will help a bit, but it won't come close to closing the gap with the US. To do that they would need to effectively become the US, or something like it and as a result their domestic cost advantage would evaporate. You don't get to move from being a third world country with a third world cost base to being a first world country and keep your third world cost base. The two go hand in hand. That's why Chinese manufacturing is beginning to lose it's price advantages over places like Vietnam and Mexico. > China is becoming international standard technology. Its mercantilist strategy has paid off since it has become the manufacturing hub of the world. China has a very long way to go before it becomes a technological rather than manufacturing powerhouse. Assembling high tech iPhone components made in the USA, Japan, Taiwan and South Korea will only get you so far. The value added to an iPhone from assembly in China is only about $10. The same goes for many other high tech goods 'manufactured' in China. They are moving up the value chain of course, that's why their cost base is rising and hence actualy their PPP advantage is beginning to erode. Japan, South Korea and Taiwan did the same thing, but China are still a very long way from the top. > China just started buying $400 billion in gas from Russia in RMB though Russia is desperate. They gave in to humiliating terms from China because the post-Crimea sanctions are bleeding their economy out.
deleted 12y ago
[deleted]
Dewie 12y ago
> Why does total GDP matter so much? Matter in what sense? If you are measuring international influence, GDP probably matters more than per capita GDP. If you are measuring standard of living, per capita GDP probably matters more than GDP.
Sorgam 12y ago
The USA is only number 10 by that measure, so nobody would care if China got to number 9. Go to Singapore or Quatar to find the richest average people, not the USA.
muyuu 12y ago
Because it's not a per capita thing how large a military you can afford, or how strongly you can lobby. On a per capita basis the US is world's #10. The US is the most important country in the world because of its aggregate power, of which the total GDP is an important factor.
- crimsonalucard 12y ago
  "most important" is kind of arrogant.
  - muyuu 12y ago
    I'm not American though. You can hardly deny it is, or let's say the most relevant. China is getting there though.
melvinmt 12y ago
Just one of many reasons why it matters: More Total GDP = More Military Spending.

czr80 12y ago

On a per capita basis the US is currently 10th (Qatar, Luxembourg and Singapore are the top 3).

justquest 12y ago

I like your name. I imagine, you would have signed up as legitquestion, but legitquestion was too long, correct? -justquest :)

legitquest 12y ago
Yes :) I signed up just to ask this one question!

tinco 12y ago

Because on the global power scale it doesn't really matter if half your population is starving or not. And if you want to compare the peoples wealth, remember the one percent rule. How much richer does the US have to be for its bottom 50% to be as wealthy as The Netherlands' bottom 50%? It's all numbers games, this number is about global economic power, the sort that could have all sorts of real (nasty) consequences.

simonh 12y ago
It's not at all about real global power, it's about domestic economic capacity. As soon as China tries to start exerting it's economic muscle abroad, it has to compete on international terms which means adjusting costs to take advantage of domestic costs doesn't matter anymore. For example, does China's GDP at PPP 'equality' with the US mean it can fford as many nuclear submarines as the US, as many aircraft carriers? As many advanced state of the art stealth bombers, fighters, tanks, spy satelites and naval bases? No, it doesn't, all it realy means is it can afford as many roads and bags of rice as the US. As soon as China starts investing in, developing or buying international standard technology and eqipment it has to start investing or spending international standard capital to do so, and PPP doesn't help anymore. Even in the case of 'soft power' such as financial support and investment in other countries, that has to be done in foreign currency. Suddenly the domestic purchasing power advantage of the Yuan becomes an equal and opposite disadvantage.
- crdoconnor 12y ago
  >It's not at all about real global power, it's about domestic economic capacity. As soon as China tries to start exerting it's economic muscle abroad, it has to compete on international terms which means adjusting costs to take advantage of domestic costs doesn't matter anymore. The entire reason the GDP and PPP GDP is so out of whack in China is because it intentionally suppresses the value of its currency to subsidize its exports. >For example, does China's GDP at PPP 'equality' with the US mean it can fford as many nuclear submarines as the US, as many aircraft carriers? As many advanced state of the art stealth bombers, fighters, tanks, spy satelites and naval bases? No, it doesn't Yes it does because all of these things require domestic manufacturing capacity. It's doubly true for military hardware in fact - just as the US doesn't want its submarine parts made in China (especially chips), China doesn't want its submarine parts made in the US. >As soon as China starts investing in, developing or buying international standard technology China is becoming international standard technology. Its mercantilist strategy has paid off since it has become the manufacturing hub of the world. >Even in the case of 'soft power' such as financial support and investment in other countries, that has to be done in foreign currency. Only if the foreign country doesn't want your currency. China just started buying $400 billion in gas from Russia in RMB though, so...
  - simonh 12y ago
    > Yes it does because all of these things require domestic manufacturing capacity. But that's manufacturing capacity it doesn't have for technology is also doesn't have. To get it will either take buying it in at international prices (in $), or take take world class investment in technology, training, manufacturing capacity etc. Having cheap rice and roads will help a bit, but it won't come close to closing the gap with the US. To do that they would need to effectively become the US, or something like it and as a result their domestic cost advantage would evaporate. You don't get to move from being a third world country with a third world cost base to being a first world country and keep your third world cost base. The two go hand in hand. That's why Chinese manufacturing is beginning to lose it's price advantages over places like Vietnam and Mexico. > China is becoming international standard technology. Its mercantilist strategy has paid off since it has become the manufacturing hub of the world. China has a very long way to go before it becomes a technological rather than manufacturing powerhouse. Assembling high tech iPhone components made in the USA, Japan, Taiwan and South Korea will only get you so far. The value added to an iPhone from assembly in China is only about $10. The same goes for many other high tech goods 'manufactured' in China. They are moving up the value chain of course, that's why their cost base is rising and hence actualy their PPP advantage is beginning to erode. Japan, South Korea and Taiwan did the same thing, but China are still a very long way from the top. > China just started buying $400 billion in gas from Russia in RMB though Russia is desperate. They gave in to humiliating terms from China because the post-Crimea sanctions are bleeding their economy out.

deleted 12y ago

[deleted]

Dewie 12y ago

> Why does total GDP matter so much? Matter in what sense? If you are measuring international influence, GDP probably matters more than per capita GDP. If you are measuring standard of living, per capita GDP probably matters more than GDP.

Sorgam 12y ago

The USA is only number 10 by that measure, so nobody would care if China got to number 9. Go to Singapore or Quatar to find the richest average people, not the USA.

muyuu 12y ago

Because it's not a per capita thing how large a military you can afford, or how strongly you can lobby. On a per capita basis the US is world's #10. The US is the most important country in the world because of its aggregate power, of which the total GDP is an important factor.

crimsonalucard 12y ago
"most important" is kind of arrogant.
- muyuu 12y ago
  I'm not American though. You can hardly deny it is, or let's say the most relevant. China is getting there though.

melvinmt 12y ago

Just one of many reasons why it matters: More Total GDP = More Military Spending.