China’s Currency Should Strengthen About 20% by 2030-2040

Richer countries tend to converge their market exchange rate with their purchasing power parity exchange rate. As China has moved up from $1000-2000 per capita income to $12000 per capita income on an exchange rate basis the price level ratio is the ratio of a purchasing power parity (PPP) conversion factor to an exchange rate has moved from 0.33 to around 0.55-0.60.


China is expected to move up to around $17000 per capita GDP by 2026 and $21000 per capita GDP by 2030.

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Some of this per exchange per capita move will be in the GDP growth figures and some will come from China getting up to the level of Costa Rica, Greece and Portugal in terms of price convergence from being a wealthier country.

The other factor is that China’s domestic consumer spending should go from about half of the level of US consumer spending to exceed EU consumer spending and to match or even exceed US consumer spending. Reducing the need for a weaker currency to boost exports will encourage China to allow its currency to strengthen. Countries with about half of the US per capita income tend to have price level ratios of about 0.70-0.72.

SOURCES- PIIE, Statistica, Index Mundi
Written By Brian Wang,