The Chinese economy just surpassed the U.S. economy to become the world’s largest in terms of purchasing power, according to the International Monetary Fund (IMF) on Wednesday.
Purchasing power parity calculates Gross Domestic Product using exchange rates that adjust for price differences of the same goods between nations.
China Gross Domestic Product is worth $17.6 trillion, while U.S. GDP is $17.4 trillion, with adjustments made for China’s low cost of living, according to the IMF’s latest World Economic Outlook.
The IMF measures economic strength by Gross Domestic Product (GDP) in both market exchange rates and average purchasing power, the latter being where China has overtaken the U.S. with a GDP of $17.6 trillion by the end of 2014 — 16.4 percent of the world’s purchasing power.
The U.S. will close out the year with a purchasing-power adjusted GDP of $17.4 trillion, or 16.2 percent of the world’s total. The U.S. still maintains its dominance in raw terms not adjusted for purchasing power by $6.5 trillion.
Analysts say the latest tally adds to the debate on how the world’s top two economic powers are progressing.
