(1998) has argued that the official statistics overstate China’s GDP growth rate by about 2% points over the reform period.<sup>50</sup> While some degree of over-estimation appears likely, questions have also been raised about the Maddison’s data and assumptions, notably in a detailed and comprehensive review by Holz (2006a,b).<sup>51</sup> Holz’s critique illustrates the tension between imposing international standards for data collection and adapting to local realities; for example, influenced by practices in some OECD countries, Maddison assumes zero growth of labor productivity in “non-material services”, while Holz questions the appropriateness of that assumption in the Chinese transition context.

_PPPs:_ International comparisons of economic aggregates have long recognized that market exchange rates are deceptive, given that some commodities are not traded; this includes services but also many goods, including some food staples. Furthermore, there is likely to be a systematic effect, stemming from the fact that low real wages in developing countries entail that labor-intensive non-traded goods tend to be relatively cheap. Global economic measurement, including poverty measurement, has relied instead on PPPs, which give conversion rates for a given currency with the aim of assuring parity in terms of purchasing power over commodities, both internationally traded and non-traded.

This paper uses the PPPs for “individual consumption by households” from World Bank (2008a,b), based on the 2005 _International Comparison Program_ (ICP). This entailed a number of improvements over past ICP rounds, including in developing detailed product listings and descriptions, which add significantly to the cost of the data collection. Country coverage improved considerably. Most importantly in the present context, this was the first time China participated officially in the ICP; nor had India participated in the 1993 ICP (the prior round used for estimating global poverty measures). The Bank uses a multilateral extension of the bilateral Fisher price index known as the EKS method. On the advantages of this method over the alternative (Geary-Khamis) method see Ackland et al. (2006).

The new PPPs still have some limitations, despite the improvements introduced by the ICP’s 2005 round. Making the commodity bundles more comparable across countries (within a given region) invariably entails that some of the reference commodities are not typically consumed in certain countries, generating either missing values or prices drawn from unusual outlets. However, the only way to avoid this problem is to choose instead more representative country-specific bundles, which introduces a quality bias, whereby lower quality goods are priced in poor countries. Also, the weights attached to different commodities in the conventional PPP rate may not be appropriate for the poor; Chen and Ravallion (2009) examine the sensitivity of our results to the use of alternative “PPPs for the poor” available for a subset of countries from Deaton and Dupriez (2009).

While in most countries the ICP price surveys had national coverage, for China, the ICP survey was confined to 11 cities. We treat the ICP PPP as an urban PPP for China and use the

> 50 More precisely, Maddison (1998) proposes a downward revision of 2.4% points for the GDP growth rate over 1978-1995; Maddison and Wu (2008) propose a downward revision of 1.7% points over 1978-2003.

> 51 Also see Maddison’s (2006) reply to Holz, and the latter’s counter-reply (Holz, 2006b).

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