The rise of New China (Sciences Po style analysis)

File photo of women wearing sunglasses in Beijing

The French call this 3-tier structure a “Sciences Po argument”:

1. Thesis: It’s official, America is now No. 2, China No. 1: The IMF recently created a flurry of excitement among commentators saying China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the US:

2. Anti-thesis: Sorry, America is still No. 1 – Because “purchasing power parity is not the right way to measure economies”. In an armchair economist nutshell, the nuance is about comparing countries’ GDP using purchasing-power-parity (PPP) exchange rates, rather than market rates. The contrarians say PPP is the right thing to do when looking at real (inflation-adjusted) income per capita in order to measure people’s living standards. But it is the wrong thing to do when looking at national income in order to measure the country’s weight in the global economy.
(PPP estimates what the exchange rate between two currencies would have to be hypothetically in order for the purchasing power of the two countries’ currencies to be on par. i.e. very simplistically: how would the Euro would have to be to the Dollar for that apple to cost the same?)

3. Synthesis: No matter what, the point is that China matters, it is maturing, and incredible sophisticated as a global power:
> Three Views of Local Consciousness in Hong Kong – a great piece:
> And a book I just got and which comes with glowing reviews: “Age of Ambition: Chasing Fortune, Truth, and Faith in the New China”, reviewed by the Economist:

The Economist encapsulates the issue perfectly:

“LAST month Chris Matthews, a well-known American television presenter, discussed on his daily programme his recent visit to China. He could hardly contain his astonishment at the size of its cities and the scale of its consumerism. What astonished those who know China was that such a prominent media personality could be surprised that Chinese people are no longer living as though it were 1976. Mr Matthews’s reaction neatly encapsulates part of China’s image problem: Western journalists and politicians express strong opinions about a country that few have visited and even fewer know well.”…

In pictures – China then and now by Reuters:


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