No system is perfect, we are talking about lot of data gathering, processing and refinement in the end....each stage has defects and flaws...each stage creates information loss (especially when you refine).
What you mean does not recognise? China certainly expanded the ICP sampling regimen past the cities (like it was before and thus not so good for China). China certainly recognises the validity of it...PPP is used in HDI and plenty of indices instead of nominal.
Well PPP is merely the bridge to compare GDP (in RMB, Yen, Rupee, Euro, Ruble, ringgit, rupiah, SGD, Pound, Swiss France, CAD etc etc etc) of local currencies to each other
directly without having to bridge through USD (that every country in the world except just one.... do not control the printing and underlying seigniorage of)....given USD is not a 100% ubiquitous reference in every country, not even close. Neither can it be ideally extrapolated at exchange rate level (which is determined by trade/investment) to an entire country production (especially when the trade level percentage wise is low compared to GDP..... and the trade composition is different to the GDP composition in terms of goods and services).
So of course RMB (for China) or whatever local currency of a country is the 1st most useful thing (thats what provides the underlying production and growth data in the first place).
I am talking more about when we want to compare A and B across the fact countries have different currencies they control and measure in. Using USD as this bridge exclusively (or even largely) is flawed, because not everyone has connected to USD forex the same way and same level (and neither is that a static level as the larger world globalises and insulates in spurts in different industries and activities of relevance).
This is part of the reason why for example it is very dumb to use USD nominal per capita numbers for China say pre 1980s when it was hugely insulated and literally had tiny amounts of USD forex and foreign trade/investment (and even that low amount...went thru and was stockpiled mostly in HK for a reason). The GDP in USD was artificially depressed by this
far beyond the inherent low GDP production (in both RMB and equivalent PPP if it existed back then). In fact this largely accounts for why India had higher GDP nominal per capita (in USD) during the cold war compared to China even though China had vastly larger underlying energy consumption per capita (though both were quite low overall)...its again because India (as insulated as it was from USD/global liquidity) was not as insulated as China was in that period with the larger world economy....thus USD/INR exchange rate (as distorted as it was) still captured more of the larger consumption picture than it did inside China at that time.
This was the whole part of the reason PPP system was created in the first place.....country A and country B (that are non US countries) do not necessarily have the same amount of world USD liquidity exposure/dependence at any given timeframe....in fact it can vary quite tremendously. One can compare say western europe and Russia....compare say the energy per capita consumption and then correlate it to USD nominal...there is a very large discrepancy merely caused by Russia's larger isolation from USD forex liquidity compared to Western Europe.
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