America second to China in economy

[Guardsman Bass]

Less environmental regulation and worker rights in China is certainly a factor in the rapid economic turnabout, but I think more important are;
a) Elites in both the US and China (and more generally, developed world vs developing world countries) profit from exploiting labour arbitrage.
b) China has a stronger cultural comittment to economic nationalism / mercentalism, while the US has an ideological comittment to 'free trade' even when it puts the US at a disadvantage.

China's still benefiting from being a relatively poor country with comparatively cheap labor and a technological lag. You can get fast growth rates in that situation just by having "good enough" institutions while drawing in tons of outside investment (plus savings) and grabbing as much outside technology as possible. In fact, that's pretty much what the US did in the 19th century - they outright refused to recognize British copyrights or patents, lured in investment from Great Britain and financial institutions across Europe, and had "good enough" institutions for development. "Good enough" meaning that there are actual consequences for being a business fuck-up in a negative way.

[K. A. Pital]

Sure. Not that simply supporting dictators is a good thing, as South Sudan shows.

Trading with countries regardless of their regime has been shown to have an overall beneficial effect on the people's well-being in the world. Was that not the case, most of the world would have still been dirt-poor.

Indeed....why the remark?

Because China's behaviour is unlikely to influence the behaviour of other countries. However, China's investment can help a huge number of people to climb out of poverty - and I mean a greater number of people than the US investment could ever help, too. Investing regardless of whether the government follows the Chinese system or not is a better strategy than trying to force all countries to follow some predetermined path. The Washington Consensus was doing too much damage by saying all countries should follow the exact same approach, without taking into account national differences. China's investment 'guidelines', if such even exist, are way more relaxed and therefore can allow a much greater diversity of options for the receiving countries.

[Thanas]

Sure. Not that simply supporting dictators is a good thing, as South Sudan shows.

Trading with countries regardless of their regime has been shown to have an overall beneficial effect on the people's well-being in the world. Was that not the case, most of the world would have still been dirt-poor.

There is a difference between just trading and blocking any attempt at UN trying to stop genocides. China does the latter.

[The Duchess of Zeon]

China is still No.2. Using GDP-PPP for a comparison at the national level is fallacious. It only matters for per-capita income of individuals. For things that matter at the level of the State, only real GDP is relevant because PPP is irrelevant outside of the local market situation, it refers only to the circumstances of individuals and companies -- which makes summing it a very bad idea, but people have gotten into the habit of doing this, mostly for purposes of national competition. This is why nobody cares, because PPP per capita is still low and the real GDP won't overtake for a while yet. It will happen, of course.

[K. A. Pital]

China is still No.2. Using GDP-PPP for a comparison at the national level is fallacious. It only matters for per-capita income of individuals. For things that matter at the level of the State, only real GDP is relevant because PPP is irrelevant outside of the local market situation, it refers only to the circumstances of individuals and companies -- which makes summing it a very bad idea, but people have gotten into the habit of doing this, mostly for purposes of national competition. This is why nobody cares, because PPP per capita is still low and the real GDP won't overtake for a while yet. It will happen, of course.

PPP is relevant if your market can produce a wide variety of goods for internal consumption, as is the case with China. The cost disparity also matters on the national level. A nuclear plant will be cheaper to make in China. It is still a nuclear plant.

[mr friendly guy]

PPP would be more useful if you produce all the goods yourself and didn't trade with anyone, eg the USSR to a large extent or historical GDP between ancient civs. GDP nominal would be quite useful if the 2 countries compared brought all their goods from a third party. Because they would be buying things at market rate.

In the real world however, most countries are a mixture of both, giving each measurement some utility. China itself prefers nominal (and its been known for some time it prefers this measurement). The other problem with PPP is that it takes a long time to gather the data to do the conversions. In fact it took years to compile the data gathered for 2012, such that the information was only released this year in 2014. What that means is, that in the interim between data gathering, the nature of the economy would have changed and when you next gather the information, you might find that the economy is smaller in PPP terms (as happened to China in 2007) or bigger (as happened to China in 2012). In other words PPP runs the risk of underestimating or overestimating an economy (even by its own standards) because the information becomes dated.

I said before, I predict people are going to use disclaimers for the next few years when they talk about the largest economy. That is the US is larger in nominal terms, while China is larger in PPP terms. At least until China becomes larger in both terms in a decade or so.