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Yeah, About That Whole "China is the Second-Largest Economy in the World" Thing...

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Remember back in August, when the headlines were filled with breathless announcements that China had surpassed Japan to become the second-largest economy in the world?

So do I. And, yes it did. By GDP.

This month's Harper's Index (subscription required) reminds us of the difference between GDP and GDP on a per-capita basis:

Global rank of China's economy in 2010, measured by GDP: 2

Rank if GDP is calculated on a per-capita basis: 94

On the afternoon of August 16th, when the announcement was made, Mark Perry, the well-known University of Michigan economist, pointed out on his Carpe Diem blog that, although China now ranked #2 as per GDP, "it ranks #102 [on a per-capita basis] according to the CIA, #99 according to the IMF, and #92 according to the World Bank. In fact, on a per-capita basis in 2009, China ranked behind Namibia, Jamaica, Belize, Thailand, El Salvador, and Albania. And the last time the U.S. had per-capita GDP of $6,567 was back in 1932."

And, as Gene Hayward of the HaywardEcon at Central High School blog noted, Robert Reich wrote on Business Insider:

"...Don’t be misled by these numbers. The important thing isn’t China’s ranking, nor the total value of China’s production, nor even the extraordinary speed by which China has reached #2. What’s most important is the share China’s production received and consumed by the Chinese themselves. The problem is it continues to drop.

"China has dozens of billionaires but the vast majority of the Chinese are still extremely poor. The typical Chinese lives off the equivalent of about $3,600 a year. That puts him behind workers in 126 other countries. (The typical Japanese earns the equivalent of about $39,000; the typical American, $46,400.)..."

In case you're hungering for more trivia data, China is still a step ahead of Bosnia & Herzegovina on the IMF's list, according to the CIA World Factbook, they're still a rung above Turkmenistan, coming in at 130th in the world, and--look out!--the World Bank shoves a stick in the IMF's eye, with Turkmenistan edging out China by one spot for the dubious honor of being rated the 83rd-largest economy in the world by GDP on a per-capita basis.

Now, about all those wealthy consumers in the world's "second-largest economy" just poised like tigers, ready to buy up all those American products US industry is counting on...
POSITION:  No positions in stocks mentioned.