Nominal per capita income higher in China than in Russia because of Ruble devaluation

China change in the GDP accounting methodology will take effect next month. China will count previously underestimated activity, and converging toward international best practice: President Xi is locking China into greater statistical transparency – by choice – with implications for how the $10 trillion economy operates. Rhodium Group (RG) re-estimated China’s 2008 nominal GDP – the most recent year which available data permit us to dissect properly, to have been 13 – 16% bigger than official figures previously showed. Beijing will be using something similar to the revised methods Rhodium Group applied to 2008 for better gauging 2013 and 2014 and years to come: extrapolating from our experience therefore, China – and hence the world economy – is likely to be seen as perhaps $1 trillion bigger a month from now than expected today.

Combining RG better assessment of 2008 and an understanding of the methodological changes we expect Beijing to make for 2013 GDP, we are in a position to offer a perspective on the soon-to-be-released results and their credibility. If the need for upward restatement we identified for 2008 holds constant for 2013, NBS’s plan to upgrade methodology should increase how large we believed China to be that year by perhaps 14.5%; but it is likely that NBS will argue it had already partially closed that gap after 2008, and therefore an upward revision of 5-10% is more likely. A 10% augmentation of the current official 2013 figure means $918 billion in new-found money – or upward revision – for last year. Projections of the 2014 full year result would be increased accordingly.

By the end of December 2014, the NBS will likely unveil its 2013 revisions. By about January 20th, 2015, they are scheduled to release a first reading for 2014 GDP. As the property and infrastructure sectors are weighing down the economy, Beijing is expected to announce a 2014 growth result that misses its stated 7.5% goal, and analysts are watching for signs of a lower than 7.5% target for 2015.

The Russian Ruble has fallen to half its value. This changes the nominal or exchange rate calculated per capita income. China passes Russia in per capita income. China GDP is being revised upwards. Russia will fall to about 15th in overall nominal GDP ranking. Canada will move back into the top 10 in GDP.


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