The Executive Officer of the National Statistical Society of China Talking about the Results of ICP 2021

Interview with China Information News on the ICP 2021 Results

On May 30, the World Bank released Purchasing Power Parities (PPPs) and the Size of World Economies—Results from the 2021 International Comparison Program(ICP). In order to make the public understand the theoretical knowledge of ICP and use the PPP results correctly, the reporter of China Information News interviewed the executive officer of the National Statistical Society of China (NSSC) on the result of ICP 2021.

1.How was the ICP 2021 implemented in the world and in China?

This latest cycle of ICP was originally scheduled to be launched in 2020, but postponed to 2021 due to the COVID-19 pandemic, therefore the base year was changed from 2020 to to 2021. Similar to previous cycles, the 2021 cycle was organized at three levels. The first is the global level, mainly the World Bank and related institutions, which are responsible for the measurement and technical guidance of global comparison results. The second is the regional level, mainly the regional implementing agencies, which are responsible for regional technical guidance and the measurement of regional comparison results. The region where China is located is the Asia-Pacific region, and the regional implementing agency is the Asian Development Bank (ADB). The third is the economy level, mainly the participating economies, which are responsible for survey organization and data submission. As far as the calculation process is concerned, the regional implementing agencies are responsible for measuring the regional results of their region, and the World Bank for calculating the global results in combination with the regional results. The global results are the well-known purchasing power parities (PPP) and the PPP-based GDP with the US dollar as the base currency.

In China, ICP is an exploratory and experimental international statistical cooperation program organized and implemented by the National Statistical Society of China (NSSC). In the 2021 cycle, the NSSC selected about 16 thousand outlets for price collection in 31 provincial areas across the country, and carried out five surveys on the household price, machinery and equipment, construction, housing rental and government compensation, respectively, and collected price data for more than 1,000 items. The on-site surveys began in March 2021 and ended in mid-2022. Afterwards, the focus shifted to the measurement and validation of other relevant data. We measured the Housing Volume data, the basic heading data of expenditure-based GDP, and matched price index from CPI. In terms of data validation, the NSSC participated in more than 20 Asia Pacific regional workshops, in addition to several meetings of the ICP Asia Pacific Regional Advisory Committee and World Bank ICP Technical Advisory Group, deeply involved in the global ICP governance.

2.How do the ICP 2021 results differ from the 2017 results?

Compared with the ICP 2017, the participating developing economies saw an obvious rise in their status in the global economic landscape. For example, in 2021, among the top 10 economies, the economic scales of developing economies accounted for 34.6% of the global economy, compared to 31.7% in 2017. As to major economies, the economic size of India and Russia surpassed Japan and Germany respectively, ranking 3th and 4th in the world, that of Brazil surpassed France, ranking 7th in the world. These changes also show that developing economies have remained a main driver of global economic growth in recent years.

As to China, China’s PPP in 2021 was 3.99, and the PPP-based GDP reached $28.82 trillion, which was 61.8% higher than the market exchange rate-based GDP of that year. Among other major developing economies, India rose by 257%, Russia by 211%, Indonesia by 198%, and Brazil by 127%. As to the share of the world economy, China’s PPP-based GDP accounted for 18.9% of the global total, and market exchange rate-based GDP 18.5%, with a difference less than 0.5 percentage points. This shows that in the 2021 cycle, the share of China’s PPP-based GDP increased, and China maintained a steady position in the world economy, making positive contribution to the world’s economy.

3. The ICP 2021 results show that China’s PPP-based GDP is $28.82 trillion, ranking first in the world. What do you make of that?

We should view that result rationally and objectively. By aggregate, China continues to surpass the United States by GDP in PPP terms and ranks first in the world, consistent with the ICP 2017 results. However, in market exchange rate terms, China’s GDP in 2021 was $17.81 trillion, second only to that of the United States. It should be pointed out that PPP-based results are not official statistics, and PPP cannot replace the market exchange rate, so PPP-based results should be used with caution.

Technically speaking, the following three factors have an important impact on China’s PPP-based GDP:

Firstly, in the implementation of the ICP, regional comparison precedes global comparison. China is located in the Asia-Pacific region where developing economies constitute the majority and prices are generally low. In the linking from regional comparison to global comparison, the low prices in the Asia-Pacific region will lead to the undervaluation of China’s PPP, which in turn will overestimate China’s PPP-based GDP.

Secondly, in this round of ICP activities, the change in the calculation method of housing service PPP in the Asia-Pacific region and the adjustment to the method linking various regions in the global comparison resulted in the expanded economic size of the Asia-Pacific region, which in turn drove up China’s PPP-based GDP.

Thirdly, different regions adopt different methods to measure PPPs in the sectors of housing, healthcare, education, construction, etc. Such differences will inevitably have an impact on the results. For example, the Asia-Pacific region, where China is located, uses input prices (materials, equipment leasing, labor) to calculate the PPPs of construction, while the EU-OECD region where the United States is located uses output prices for calculation. Meanwhile, construction accounts for a considerable share of China’s GDP, which will lead to the underestimation of its PPPs at GDP level, and then the overestimation of the PPP-based GDP.

4.China’s PPP-based GDP per capita reached $20407 in 2021. Will this finding affect the judgement on which development stage China is in?

China’s PPP-based GDP per capita in 2021 was $20407. Although this is much higher than China’s market exchange rate-based GDP per capita of that year, due to the general increase in the PPP-based GDP per capita in developing economies, China ranks 85th in the world, even 13 positions below when ranked (72th) by the market exchange rate-based GDP per capita. China, with GDP per capita of $20407, still lags far behind the widely-recognized developed economies. In 2021, China’s PPP-based GDP per capita was only equivalent to 28.7% of that of the United States, 38.6% of that of the United Kingdom, and 32.9% of that of Germany. GDP per capita is a basic indicator to measure the development level of a country (region). Thus, China is still the largest developing country in the world.