Organization: Penn State University
Date: Mon, 7 Sep 1992 09:34:25 EDT
From: <ZQH@psuvm.psu.edu>
Newsgroups: soc.culture.taiwan,soc.culture.hongkong
Subject: Is Mainland China #3 Economic Power?

After I posted the following article in s.c.c., I received several
e-mails asking me to repost it to s.c.t. and s.c.hk.  Well, what
the heck, today is the Labor Day, and it'll take me just one minute
to do so.  If you have read it in s.c.c., please `quit' now.

-------- cut here --------

There have been some discussions about Mainland China's economic
development on s.c.c. recently (out of all those nonsenses flying
around, the signal-to-noise ratio of s.c.c. is TOO low :-(  ).
It seems that people like to quote the GNP based on exchange rates
as the measure of a nation's economic strength.  Well, if you
believe people can `suffer' as Chinese in Mainland with a GNP
per capita of US$300 AND prices of Western world, I have a bridge
in Brooklyn on sale for you. ;-)  How about a tower in Paris? ;-)

It's well known among the intelligence circles that the GNP based
on exchange rates could be quite misleading, and the organizations
such as the IMF (International Monetary Fund) stopped using it as
the mean to measure a nation's economic power long ago (but the
unsophisticated populace, including the press, still treat the GNP
based on exchange rates as the gospel on a nation's wealth :-( ).

(An extreme example to show how inaccurate the GNP based on the
 exchange rate could be is the former Soviet Union(CIS):  if based
 on the exchange rate, the GNP per capita now is less than US$100.
 However, the CIS produces about 11 million barrels of oil daily
 --- with the oil price of US$20 per barrel, the cash value of
 this commodity is  US$20/barrel x 11*10**6 barrel/day x 365days/year
 --- about US$80.3 billion per year.  The population of whole CIS
 is about 287 million.  So the GNP per capita, if based on the oil
 production alone, should be US$80.3*10**9/(287*10**6) = US$280
 --- much much bigger than the figure based on the exchange rate!!!
 Anyway, the problem with the former Soviet Union was that it spent
 most of its resource on weapon production and ignored the basic
 needs of its citizens).

The UN and IMF have developed a sophisticated system to calculate
the actual GNP's of all nations --- the so-called GNP by purchasing
power (it may not be perfect but what else is out there?).  The
following is from the `Fortune' magazine (page 128-129, October 7,
1991):

  | 1988 |         GNP per capita       GNP             GNP
  |Figure|      (by purchasing power)           (by purchasing power)

  Mainland           US$ 2,472      [US$ 363.8B]     US$2,803.2B
   Taiwan            US$ 6,528      [US$ 161.7B]     US$  131.9B
  HongKong           US$14,014      [US$  70.1B]     US$   81.3B
  Singapore          US$10,417      [US$  35.2B]     US$   28.1B

   Japan             US$13,645      [US$2961.0B]     US$1,685.2B
  S. Korea           US$ 5,682      [US$ 238.0B]     US$  243.2B

Note:
  1). The suffix `B' in GNP figures means billion.
  2). The figures in the second column are (misleading) GNP's based
    on exchange rates.  The 1st & 2nd columns are original data.
  3). The figures in the third column are calculated by multiplying
    the figures in the first column with the population.


As some s.c.c. netters have pointed out, the percentage of service
section (the so-called `tertiary enterprises') in the GNP of Mainland
China is quite low, comparing with the Western world (10% vs 50% ?)
and we all know how primitive the service is in Mainland China.
However, the service industry are usually labor-intensive.  So there
will be a lot of rapid expansions in the service section.

The GNP of U.S. was US$5,200 billions in 1989 (from the World Almanac,
1992).  Assuming a growth of about 4% in 1989, the 1988 figure of
U.S. GNP should be about US$5,000 billions.  I think the so-called
`purchasing power' is using the U.S.A. as the reference (yeah, U.S.
is the benchmark of insert-your-favorite-term).

IMHO, in 1988 (when the Soviet Union was still in the high gear of
production), the ranking of economic powers according to the actual
GNP by purchasing power are (T means trillion, in U.S. dollars):

  U.S.A., U.S.S.R., P.R.China, Japan, Germany, ...
  $5.0T    $3-4T      $2.8T    $1.7T   $1.5T          (in 1988)

However, there is nothing to be proud of (actually Chinese should
feel ashamed), given the fact that the productivity (GNP per capita
by purchasing power) in Mainland China is only 1/8 of that in U.S.A.
(US$2,472 vs. US$20,000).  It will take 70 years for Mainland China
to catch up the GNP per capita of then-U.S.A., assuming, in average,
Mainland China's economy grows 3% faster than U.S.' (5% faster in
the current early stage, and only 1% faster in the late stage).
It will be 105 years if the average is only 2% faster.  By then,
the Mainland China's economic power (population 1.4 billion) will
be about the same as the combination of North America, whole Europe
plus Japan (population 1.3 billion, up from 1.1 billion now).
[Actually, the former Singapore Prime Minister Lee Kwan-Yan(?) said
the exactly same thing recently].  Well, just happy day dreaming
since we won't live that long.

Anyway, this is just MHO, please treat it with a grain of salt.

James Huang