Major GDP Adjustments
Recently the World Bank made some pretty major adjustments to the GDP of both China, India and a few others. China and India both had GDP reductions of 40% from previous estimates, which is huge. China went from an almost $9 trillion dollar GDP, to a $5.8 trillion dollar GDP. The Economist wrote a brief article about it (and the image you see is taken from the article).
If you didn’t know, China has been the worlds # 2 economy, it has passed Japan in the last couple years. Now that the GDP has been reduced so significantly, it’s fallen back to the # 6 position. There are some people who are really excited about this news for the US and other world powers, as it supposedly locks us in as the world power for a bit longer, but I wonder of the motives of this re-evaluation. Of course I can guess at the motives, but how does it effect something like interest rates?
With China having fixed the exchange rate with the US and the Euro, is this an attempt for the World Bank to tip back the scales a bit? I wish I knew more about Economics and could give a better argument.
I also wonder how this plays into a lot of the other financial forces going on today – the housing bubble, China owning over $1 trillion US Dollars, concerns about US consumer spending. All of these things add up to a confusing picture for me. You can always find people who see a recession coming, or those who see lots of growth and opportunity ahead. I guess I’d just love to understand how this re-evaluation fits into everything and how it fits in with everything.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
