IMF WEO Database (April 2017): China and US grow most

[Mista]

$35 billion is the size of Japan's entire defense budget. A 1% growth is significant in a Japanese economy that is growing at 0-1% annually.

That's why I bold the word 'CUMULATIVE', from 2015 to 2020. If you average it out over 5 years, it adds only $8 billion to the GDP. For an economy of $5 trillion, $8 billion is roughly only 0.0016% of the GDP. It's a non-starter.

 

[Martian2]

That's why I bold the word 'CUMULATIVE', from 2015 to 2020. If you average it out over 5 years, it adds only $8 billion to the GDP. For an economy of $5 trillion, $8 billion is roughly only 0.0016% of the GDP. It's a non-starter.

That is only the start. It compounds as the years go by.

$8 billion of additional GDP in a STAGNANT Japanese economy is a big deal.

Read the press reports by Japanese Prime Minister Shinzo Abe on the importance of TPP to Japan.


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Japan's economy is currently $4.8 trillion. It has lost almost $1 trillion from eight years ago. TPP offers the only opportunity to enlarge Japan's nominal GDP by $8 billion per year. No other program offers a billion-dollar-size benefit.

$8 billion dollars is meaningless to an economy like China's that grew by almost $6 TRILLION in the last eight years.

In contrast, $8 billion is a gold mine to a shrinking economy like Japan's.

 

[Mista]

That is only the start. It compounds as the years go by.

$8 billion of additional GDP in a STAGNANT Japanese economy is a big deal.

Read the press reports by Japanese Prime Minister Shinzo Abe on the importance of TPP to Japan.

Japan is a beggar. Its economy is shrinking. $8 billion to a beggar is a lot of money.
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Yeah sure, 0.0016 of the GDP is a big deal to reverse a stagnant economy.

You're calling Japan a beggar, when it's still the third largest economy, largest creditor nation, high net financial assets per capita. It's clear at this point you are no different from other nationalist who just anti-Japan and cherry-picking your sources to prove your otherwise non-substance, one-sided argument. I rest my case.

 

[Martian2]

Japan is a dead country economically with a negative nominal GDP growth.

It has no future and it will remain at $5 trillion GDP for the next five years.

During the same timeframe, the IMF projects China will grow by another $6 TRILLION to a total of $17.7 TRILLION by 2022.

Yeah sure, 0.0016 of the GDP is a big deal to reverse a stagnant economy.

You're calling Japan a beggar, when it's still the third largest economy, largest creditor nation, high net financial assets per capita. It's clear at this point you are no different from other nationalist who just anti-Japan and cherry-picking your sources to prove your otherwise non-substance, one-sided argument. I rest my case.

I suggest you learn how to discuss a topic.

The topic is nominal GDP.

It is not being a creditor nation. A creditor nation is irrelevant to national GDP.

Furthermore, a creditor nation is exposed to the huge risk of the US choosing to inflate away the US dollar and thus destroying Japan's credit assets. Additionally, other countries may unilaterally renege on their repayment through nationalization or straight-out repudiation.

Japan's status of having saved up credit is meaningless in a discussion on national GDP. Japan's credit rests on the goodwill of other nations to honor their debts. If other countries refuse to honor their debts to Japan then Japan becomes a completely beggar country overnight.

 

[Shajida Khan]

IMF WEO Database (April 2017): China and US grow most

The IMF has released its latest April 2017 WEO (World Economic Outlook) data set. It is the most up-to-date GDP data available.

We will look at the IMF data for the past eight years (2010-2017) to filter out yearly gyrations and examine the long-term trend.

When you look at the world's 11 largest economies, you will notice that only three countries experienced significant economic growth. China grew the most at nearly 100% and an absolute growth of $5.73 trillion ($11.79 trillion - $6.06 trillion).

The US came in second with $4.45 trillion of absolute growth at nearly 30% growth.

India's absolute growth was a meager $0.75 trillion at 44% growth.

All of the other world's-11-largest-economies showed little or negative growth.

Since China (+$5.73 trillion) and the US (+$4.45 trillion) produced the only truly significant economic growth in the world during the past eight years, it makes sense to only pay attention to China and the US. The other countries are stagnant.

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Primary source from the IMF: World Economic Outlook Database April 2017 | IMF

Wikipedia has arranged the latest IMF April 2017 WEO data into a well-organized chart.

Interesting post. Just few things.

1. Nominal GDP does not account for role of inflation or corrects the inflation (see in the wikipedia link that you have used for the table, https://en.wikipedia.org/wiki/List_of_countries_by_past_and_projected_GDP_(nominal)), this means the increase in Nominal GDP has both economic growth and inflation as the reason. To really look at the relative economic growth, you should look at what is called as 'Real GDP' or 'GDP at constant prices in national currency'. For export heavy economies, this will still not take care of currency depreciation/appreciation, which might happen in case of economies such as Japan.

2. Also, difference of price points of various goods and services are not accounted for in nominal GDP, so economic comparison can be misleading. How so? India produces atleast as much as potatoes in tonnage as US does but in terms of US dollars, US has atleast one and a half times more dollar figure. So a PPP based comparison will make more sense to correct this.

Keeping these in mind, The Economic Growth in China during this period (2010 - 2017) is

Real GDP growth as seen in constant national currency

(https://www.imf.org/external/pubs/f...ort=country&ds=.&br=1&c=924&s=NGDP_R&grp=0&a=)

(79.0 - 47.0)*100.0/47.0 = 68.0 percent

Real GDP growth as seen in constant 2010 US Dollars (from 2008 - 2015, world bank does not have 2016 data or 17 projections)

http://data.worldbank.org/indicator/NY.GDP.MKTP.KD?locations=CN

(8.91 - 5.01) x 100.0 / 5.01 = 78 %

 

[Shotgunner51]

Japan is still the largest creditor nation in the world. She could easily push up her currency if she wants.

A bit of history. US displaced Britain to become world's top creditor nation since World War One, maintains throughout World War Two until Reagan times when position moved in opposite direction, and nowadays is world's largest debtor nation. Yes, Japan displaced US as world's top creditor nation since 1990 and maintains the position till nowadays.

P.S.: Per international practice accounts China Mainland as an entity, so strictly speaking nowadays China should be top creditor nation since Hong Kong and Taiwan, both are also among top creditor economies, should be included.
https://defence.pk/pdf/threads/who-are-worlds-top-10-largest-creditor-nations.455610/​

Japan's status of having saved up credit is meaningless in a discussion on national GDP. Japan's credit rests on the goodwill of other nations to honor their debts.

The net position is mostly from FDI, Japan owned overseas FDI assets as high as Yen 150.365 trillion (end March 2016) while inbound FDI liabilities is only Yen 25.591 trillion, net FDI position is Yen +124.774 trillion. Similarly in Portfolio Investment. Japan owned these net assets, but associated economic activities (i.e. GDP) data doesn't account in domestic data inside Japan. In plain language, Japan owned a lot of overseas assets and conduct economic activities outside home soil, that's why home data looks "stagnant".

http://www.mof.go.jp/international_policy/reference/iip/201609a.pdf​

Though China Mainland is also a creditor nation, but the makeup of asset is entirely different. At peak time China Mainland holds 60% of total foreign assets in FXR (largely US T-bills to support fast growing US public debt), but less than 20% in FDI. In comparison Japan holds only 14% of total foreign asset in FXR, Germany only 2%. China began a strategic shift in 2013, pivot away from FXR and towards outbound FDI (Africa, OBOR, LatAm, CEE). Among all targets, China also wants to swap the dollar-denominated debts for real assets in US (a grand version of debt-equity-swap), but so far this path isn't too smooth due to US "national security" concern, which even tries to block Chinese M&A in other countries.

On topic, given the sizes naturally China and US "grow" most, aka in GDP (=C+I+G+NX), but the way of "growth" is entirely different if not exactly opposite. China does not issue international reserve currency, doesn't have unlimited international purchasing power nor unlimited international debt ceiling, US does.

• US consumption and public expenditure (military spending will grow faster than others) will continue to drive US "growth".
• China infra and industrial base is far bigger than US, in many sectors even bigger than rest-of-world combined. Growth will continue to be driven by gross domestic savings (hence domestic investment), industrial-production, exports and outbound investment (acquiring overseas assets or greenfield).

There is hardly a meaningful comparison between China and US, they are "growing" in opposite directions.

 

[Mista]

US has risen to become world's top creditor nation since World War One, maintains throughout World War Two, until Reagan times when position moved in opposite direction, and nowadays world's largest debtor nation. Yes, Japan replaced US as world's top creditor nation since 1990 and maintains the position till nowadays.


The net position is mostly from FDI, Japan owned overseas FDI assets as high as Yen 150.365 trillion (end March 2016) while inbound FDI liabilities is only Yen 25.591 trillion, net FDI position is Yen 124.774 trillion. Similarly in Portfolio Investment. Japan owned these net assets, but associated economic activities (i.e. GDP) data doesn't account in domestic data inside Japan. In plain language, Japan owned a lot of overseas assets and conduct economic activities outside home soil, that's why home data looks "stagnant".

Though China Mainland is also a creditor nation, but the makeup of asset is entirely different. At peak time China Mainland holds 60% of total foreign assets in FXR (largely US T-bills to support fast growing US public debt), but less than 20% in FDI. In comparison Japan holds only 14% of total foreign asset in FXR, Germany only 2%. China began a strategic shift in 2013, pivot away from FXR and towards outbound FDI (Africa, OBOR, LatAm, CEE). Now China also wants to swap the debts for real assets in US, but so far this path isn't too smooth due to US "national security" concern, which even tries to block Chinese M&A in other countries.

(P.S.: International practice accounts China Mainland as an entity, so strictly speaking, nowadays China should be top creditor nation since Hong Kong and Taiwan, both are also among top creditor economies, should be included.)

On topic, given the sizes naturally China and US "grow" most, aka in GDP, but the way of "growth" is entirely different if not exactly opposite, there is no comparison between the two. China does not issue international reserve currency, doesn't have unlimited international purchasing power nor unlimited international debt ceiling. US consumption and public expenditure (military spending will grow faster than others) will continue to drive US growth, in the contrary China growth will continue to be driven by domestic savings (hence domestic investment), industrial-production, exports and outbound investment (acquiring overseas assets or greenfield).

https://defence.pk/pdf/threads/who-are-worlds-top-10-largest-creditor-nations.455610/
http://www.mof.go.jp/international_policy/reference/iip/201609a.pdf

Thanks for sharing your insights. I'm glad you're the moderator in this section. You have a more balanced world view and look at things more objectively without allowing nationalistic feelings to cloud your judgement.

On-topic, it seems like there's increasing 'offshore' economy going around with globalization. The Japanese for example are venturing abroad, conducting economic activities and earning money outside of national boundaries.

 

[Shotgunner51]

On-topic, it seems like there's increasing 'offshore' economy going around with globalization. The Japanese for example are venturing abroad, conducting economic activities and earning money outside of national boundaries.

Yes that's Japan's globalized economic landscape, in fact you can also find the same for your own countrymen (Singaporeans) who own huge amount of FDI or portfolio assets across the globe (Broadcom, PSA, Temasek, too many examples), doing business and making dividend money outside a relatively small and "stagnant" (high savings, low consumption, like other East Asian countries) home market. In this dimension, Japan is a bigger version of Singapore, China Mainland is on its way to become a giant version of Singapore.

P.S.：About Singapore, on a per capita basis, your countrymen (each Singaporean) even owns more net foreign assets (+$152,935 end 2015) than Japanese, in fact is world's highest surpassing Hong Kong (+$133,671), Norway (+$134,631), Switzerland (+$73,005), Taiwan (+$44,862), Luxembourg (+$31,043) or Belgium (+$24,474). If you can sustain a 5-10% yearly dividend on your net foreign assets, that's very good addition to wealth.​

On topic, China Mainland domestic economy (GDP) has been growing fast for the last 2-3 decades, guess which outsider benefited most? 70-80% of inbound FDI to China Mainland owned by Hong Kong, these assets on average scores 7% dividend. Mainland economy is one key driver of Hong Kong citizen wealth.

 

[randomradio]

India grew 44% over eight years, but it only totaled $0.75 trillion. This means it is mathematically impossible for India to catch China or the US.

Even if $0.6T of the 0.75T came only from the last 3 years?

India saw growth in dollar terms only because of a stable currency.

US prints the currency the world uses. China manipulates its own currency. But India's currency is in a free floating system with minor dependence on trade. So how do you compare these three economies in dollar terms?

The only way you can compare the three economies is if you actually do the same comparison using their own currencies.

US
2010: $14.9T
2017: $19.4T

China
2010: 40.12T CNY
2017: 82.6T CNY

India
2010: 77T INR
2017: 158T INR

You see, both China and India have had the same levels of growth. The only difference is CNY grew strong due to a trade surplus while INR weakened due to a weaker USD supply.

Japan
2010: 500T Yen
2017: 550T Yen

Japan's grown too.

 

[Martian2]

Even if $0.6T of the 0.75T came only from the last 3 years?

India saw growth in dollar terms only because of a stable currency.

US prints the currency the world uses. China manipulates its own currency. But India's currency is in a free floating system with minor dependence on trade. So how do you compare these three economies in dollar terms?

The only way you can compare the three economies is if you actually do the same comparison using their own currencies.

US
2010: $14.9T
2017: $19.4T

China
2010: 40.12T CNY
2017: 82.6T CNY

India
2010: 77T INR
2017: 158T INR

You see, both China and India have had the same levels of growth. The only difference is CNY grew strong due to a trade surplus while INR weakened due to a weaker USD supply.

Japan
2010: 500T Yen
2017: 550T Yen

Japan's grown too.

Your claim is NOT TRUE.

India's currency is not freely convertible. It is only quasi-convertible. If the Indian currency was fully convertible, the market would drive the Indian Rupee further down in value due to the huge twin federal and trade deficits.

Moving on to your other point, I've previously covered the issue of apples-to-apples comparison. It is meaningless to discuss economic growth in local currencies. The only way to make a direct comparison is in US Dollars (which is the world's reserve currency). Otherwise, Zimbabwe would be the champion of economic growth in local currency, which would be ridiculous because Zimbabwe is an economic basket case.

Citations:

Full convertibility on capital account unlikely for few years | The Hindu

INR is not fully convertible at this stage: RBI | IIFL

 

[randomradio]

Your claim is NOT TRUE.

India's currency is not freely convertible. It is only quasi-convertible. If the Indian currency was fully convertible, the market would drive the Indian Rupee further down in value due to the huge twin federal and trade deficits.

I agree INR is managed, but not even close to China's. INR is a free floating currency, but managed whenever there is volatility in the market with respect to the USD.

But the exchange rate is useless when you talk about the Indian economy in comparison to richer economies. The Indian economy has actually grown quite considerably even after the devaluation.

Moving on to your other point, I've previously covered the issue of apples-to-apples comparison. It is meaningless to discuss economic growth in local currencies. The only way to make a direct comparison is in US Dollars (which is the world's reserve currency). Otherwise, Zimbabwe would be the champion of economic growth in local currency, which would be ridiculous because Zimbabwe is an economic basket case.

A ridiculous argument. Comparing stables economies to basket cases.

 

[Martian2]

I agree INR is managed, but not even close to China's. INR is a free floating currency, but managed whenever there is volatility in the market with respect to the USD.

But the exchange rate is useless when you talk about the Indian economy in comparison to richer economies. The Indian economy has actually grown quite considerably even after the devaluation.



A ridiculous argument. Comparing stables economies to basket cases.

You are fundamentally wrong.

Comparing growth in local currencies is pointless, because their inflation rates and monetary policies are different.

Only an apples-to-apples comparison is valid. The benchmark is the world's-reserve-currency US Dollar, which results in nominal GDP.

In nominal GDP terms, India's absolute growth of $0.75 trillion over eight years is too tiny to bother mentioning next to China's almost $6 trillion growth and the US $4.5 trillion growth over the same eight years.

 

[Shajida Khan]

You are fundamentally wrong.

Comparing growth in local currencies is pointless, because their inflation rates and monetary policies are different.

Only an apples-to-apples comparison is valid. The benchmark is the world's-reserve-currency US Dollar, which results in nominal GDP.

In nominal GDP terms, India's absolute growth of $0.75 trillion over eight years is too tiny to bother mentioning next to China's almost $6 trillion growth and the US $4.5 trillion growth over the same eight years.

May I know what you are trying to achieve when you say 'comparison'?

Consider this :-

An economy grew by 8 percent and has 5% inflation. (Nominal growth will be higher but a lot of growth is due to inflation only)
Another grew by 4 percent but has only 1% inflation. (Real growth will higher)

First grew from a base of 800 billion dollars. ( Absolute nominal growth will be higher_
second grew from a base of 200 billion dollars.

First has a PPP factor of 1.2
Second has a PPP factor of 7.1 (Actual goods and services produced and consumed will be more)


In the end, GDP nominal, Real GDP at constant national currency, GDP in constant US dollars, GDP at current US Dollars, GDP at current national currency, GDP PPP are all measures of size of economy each giving more weightage to a certain aspect of economy and their usage depends upon economy under consideration. There is NO FUNDAMENTALLY BETTER WAY TO MEASURE GDP. There are pros and cons. A lot depends upon quality of data as well. Not all countries measure/report all their data with same quality.

Read about my example of potato production in India and US and compare them in USD and tonnage.

Only an apples-to-apples comparison is valid. The benchmark is the world's-reserve-currency US Dollar, which results in nominal GDP.

Wrong. There are more than one GDP measure by USD. It could be constant US Dollars or Current US Dollars or it could GDP in PPP dollars. Constant currency takes inflation into account. Current currency does not. FYI the word nominal means 'In Name/Face Value'. So It is GDP nominal in USD is GDP in USD at face value. 'Real GDP' is usually considered After deflating this by a deflator value which is the measure of inflation for that country (in wholesale or retail prices).

China's GDP in Constant USD dollars (2010) for Year 2015 was 8.91 trillion while in Current US Dollars it was around 11.065 trillion AFAIK.

Constant US dollars
http://data.worldbank.org/indicator/NY.GDP.MKTP.KD?locations=CN

Current US Dollars
http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=CN

Secondly, when you are comparing economies of two countries at different price levels, GDP PPP makes more sense. A lot of developing countries have lesser prices -- especially for services. This is even more important in India because service form much larger portion (45%) of GDP than industry/manufacturing (29%).

Ultimately GDP is a measure of economy and economy of a country is based on real goods and services produced and consumed in that country. Dollars for domestic portion of economy is a misleading and arbitrary measure of value.

In the end, I think Li Keqiang was wiser to discard all of these synthetic measures of economy and look at the real numbers from provinces which capture the real growth of economy in terms of real and hard to fake data like electricity consumed, volume shipped, bank credit used etc.

References :
http://www.imf.org/external/pubs/ft/fandd/basics/gdp.htm

 

[Martian2]

May I know what you are trying to achieve when you say 'comparison'?

Consider this :-

An economy grew by 8 percent and has 5% inflation. (Nominal growth will be higher but a lot of growth is due to inflation only)
Another grew by 4 percent but has only 1% inflation. (Real growth will higher)

First grew from a base of 800 billion dollars. ( Absolute nominal growth will be higher_
second grew from a base of 200 billion dollars.

First has a PPP factor of 1.2
Second has a PPP factor of 7.1 (Actual goods and services produced and consumed will be more)


In the end, GDP nominal, Real GDP at constant national currency, GDP in constant US dollars, GDP at current US Dollars, GDP at current national currency, GDP PPP are all measures of size of economy each giving more weightage to a certain aspect of economy and their usage depends upon economy under consideration. There is NO FUNDAMENTALLY BETTER WAY TO MEASURE GDP. There are pros and cons. A lot depends upon quality of data as well. Not all countries measure/report all their data with same quality.

Read about my example of potato production in India and US and compare them in USD and tonnage.



Wrong. There are more than one GDP measure by USD. It could be constant US Dollars or Current US Dollars or it could GDP in PPP dollars. Constant currency takes inflation into account. Current currency does not. FYI the word nominal means 'In Name/Face Value'. So It is GDP nominal in USD is GDP in USD at face value. 'Real GDP' is usually considered After deflating this by a deflator value which is the measure of inflation for that country (in wholesale or retail prices).

China's GDP in Constant USD dollars (2010) for Year 2015 was 8.91 trillion while in Current US Dollars it was around 11.065 trillion AFAIK.

Constant US dollars
http://data.worldbank.org/indicator/NY.GDP.MKTP.KD?locations=CN

Current US Dollars
http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=CN

Secondly, when you are comparing economies of two countries at different price levels, GDP PPP makes more sense. A lot of developing countries have lesser prices -- especially for services. This is even more important in India because service form much larger portion (45%) of GDP than industry/manufacturing (29%).

Ultimately GDP is a measure of economy and economy of a country is based on real goods and services produced and consumed in that country. Dollars for domestic portion of economy is a misleading and arbitrary measure of value.

In the end, I think Li Keqiang was wiser to discard all of these synthetic measures of economy and look at the real numbers from provinces which capture the real growth of economy in terms of real and hard to fake data like electricity consumed, volume shipped, bank credit used etc.

References :
http://www.imf.org/external/pubs/ft/fandd/basics/gdp.htm

No one cares what the Indian growth rate was in Rupees.

The Rupee is not an internationally acceptable currency. You can't buy anything with it (except for a very limited direct-swap government-to-government agreement).

The Indian Rupee is not a "hard currency."

Thus, it is irrelevant what the Indian growth was in Rupees. You can't buy Boeing airplanes or machine tools with Rupees.

In contrast, the US Dollar is the world's reserve currency. As a standard benchmark, nominal GDP has always been used to determine the relative size of different economies for countries.
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"Nominal GDP estimates are commonly used to determine the economic performance of a whole country or region, and to make international comparisons. Nominal GDP per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; therefore using a basis of GDP at purchasing power parity (PPP) is arguably more useful when comparing differences in living standards between nations."

Nominal GDP is the proper measure to compare the economies of different countries. PPP is probably the more accurate measure when comparing living standards. In this thread, I am clearly comparing the national economic strength of different countries. Thus, nominal GDP (which is set in US Dollars) is the proper measure.

 

[Shajida Khan]

Nominal GDP is the proper measure to compare the economies of different countries. PPP is probably the more accurate measure when comparing living standards. In this thread, I am clearly comparing the national economic strength of different countries. Thus, nominal GDP (which is set in US Dollars) is the proper measure.

I guess you should read that IMF link which details about GDP and how to interpret it and when to use what and when what works and when it does not work well.

'National Economic Strength' -- I am not sure what this is and how it is measured. I am aware of GDP which measures 'Size of Economy'. Not sure what is 'Strength of Economy'.

Do you have any reference which clearly defines what 'Strength of Economy' means and which measure of GDP suits it better?

Clearly, Inflation is not a 'Strength' per say and Nominal GDP in USD includes Inflation. Which is why we call it 'Nominal'. It is merely face value of the goods and services produced expressed in US Dollars in current rate.

Here is what IMF has to say on this matter :

http://www.imf.org/external/pubs/ft/fandd/basics/gdp.htm

"
Comparing GDPs of two countries
GDP is measured in the currency of the country in question. That requires adjustment when trying to compare the value of output in two countries using different currencies. The usual method is to convert the value of GDP of each country into U.S. dollars and then compare them. Conversion to dollars can be done either using market exchange rates—those that prevail in the foreign exchange market—or purchasing power parity (PPP) exchange rates. The PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another to purchase the same amount of goods and services in each country. There is a large gap between market and PPP-based exchange rates in emerging market and developing countries. For most emerging market and developing countries, the ratio of the market and PPP U.S. dollar exchange rates is between 2 and 4. This is because nontraded goods and services tend to be cheaper in low-income than in high-income countries—for example, a haircut in New York is more expensive than in Bishkek—even when the cost of making tradable goods, such as machinery, across two countries is the same. For advanced economies, market and PPP exchange rates tend to be much closer. These differences mean that emerging market and developing countries have a higher estimated dollar GDP when the PPP exchange rate is used.
"

No where they endrose Nominal as THE method to compare economies of two countries. Truth about Indian economy or a number of economy (this will include Chinese ecnomy as well) is that they have a large amount of nontraded items. Like hair cuts, education services, health services etc etc.

If you are comparing GDP against historical one, Real GDP makes more sense. It shows the real growth in economy.

Ultimately, GDP is not a measure of 'Strength' per say -- whatever that means in the first place. GDP measures sum total of Good and Services produced in an economy (Plus FDI etc to be technically correct). Different values are arrived by using different methodlogies and it is used on a case by case basis because economies have different price and inflation realities.