Another view of per capita GDP
Updated: 2010-12-24 10:11
By Wang Jianmao (China Daily European Weekly)
In the past decade, the Chinese people have been repeatedly reminded that,
according to the World Bank's ranking, China is still behind100th place in terms
of per capita GDP. In 2010, with China poised to become the second-largest
economy in the world, measured at market exchange rates, the message is
repeated yet again.
But the message is flawed.
In fact, the World Bank does not have a
ranking based on per capita GDP. Every
year, instead, it compiles a ranking of per
capita GNI (gross national income, a
measure of a country's income, similar to
GDP) for about 200 economies in the
world. The table on this page lists the GNI
per capita, converted into US dollars
using the so-called World Bank Atlas
method, and the rank of GNI per capita
for China and other large economies in
2009. This ranking has never been
seriously challenged.
In 2009, China was ranked 125th in per
capita GNI among 213 economies,
excluding Taiwan. However, this ranking
has to be viewed within the context of a
few relevant facts to which due attention
has never been paid.
The first fact to consider is that the World
Bank's ranking pool is too heterogeneous
in population size. Of the 213 economies in the pool, 58 economies are "micro
economies" with a population below 1 million; and the population size ranged
from Tuvalu's 12,373 to China's more than 1.3 billion.
Another missing fact is that very small economies tend to be rich. Of the 58 micro
economies, 29 are "high-income", 13 are "upper middle-income", 14 are "lower
middle-income", and only two are "low-income", according to the World Bank's
classification. In fact, a standard statistical test (the so-called contingency table
test) shows that GNI per capita is not independent of population size.
Obviously, although more economies are ranked ahead of China in GNI per
capita than behind, those economies ranked ahead of China tend to be small in
population while those ranked behind tend to be large. Therefore, the World
Bank's ranking of GNI per capita is biased in measuring many countries'
performance in economic development.
Even worse, not only is the World Bank's ranking of GNI per capita misleading, it
has also become a convenient excuse for many problems in China. The implicit
logic is this: Because "China is still behind 100th place in per capita GDP", the
Chinese people cannot afford to have fair distribution of income, equal access to
quality education, clean environment, effective protection of property in general
and intellectual property in particular, etc. In a nutshell, China's global rank of
GNI per capita by the World Bank has been an excuse for vested interests to
avoid change and to delay reform within the country.
Of course, if China can maintain its speed of growth, it will "grow into" the top 100
in per capita GDP or GNI within five years anyway. However, if China maintains
its model of growth due to avoidance of change and delay in reform, it may grow
into a major crisis before it breaks into the top 100.
Fortunately, an unbiased ranking index of economic development can be
constructed for every economy*. And that index shows that although the Chinese
economy still belongs to the poorer half of all economies, the Chinese population,
as a whole, already belongs to the richer half of the world population. In fact, the
Chinese have been in the richer half of the world population for about a decade,
after the Asia financial crisis dramatically switched China's position with that of
Indonesia.
In his April 2006 speech at Yale, President Hu Jintao said: "We aim to raise
China's GDP to $4 trillion by 2020, averaging $3,000 per person. By then,
China's economy will be better developed and its democracy will be further
enhanced. More progress will be made in science and education. Its culture will
be further enriched, the society will become more harmonious and the people will
lead a better life."
In 2010, China's GDP is expected to be close to $6 trillion and its per capita GNI
is expected to exceed $4,000, turning China from a lower middle-income country
to an upper middle-income country. Hence, China remains a developing country
but it has entered a new phase of development and thus can no longer afford to
delay reform.
Given the fact that China's growth has grossly exceeded its original plan and the
truth that the Chinese population - as a whole - already belongs to the richer half
of the world population, it is time for the Chinese government to accelerate
reform and to deliver, now, what was originally promised for 2020.
The author is professor of economics at China Europe International Business
School, Shanghai.