PPP comparisons are useless. You can't adjust the price of international inputs- imported machinery or a ticket from San Francisco to Beijing, particularly in an export-oriented economy, the utility of PPP comparisons is virtually nil. The Chinese economy remains about half the size of the American.
Well, I want to be clear about my post. I just was noting that I predicted the 2011 ICP will push up the PRC PPP numbers to a point where in PPP terms the PRC will be very close if not already not larger than USA. As of yesterday this did seems to have taken place. I did not mean for my post to indicate that I agree with the statement that "China to overtake US economy" since there are many definitions of what overtake means.
As for PPP, I think it is a very good way to compare standard of living and a reasonable way to measure, within limit, the sizes of economies within the context of total value of commercial output. I think it does not measure economic power where I do agree using exchange rate methods are closer. So I would say that there is a case to be made that PRC economy is larger than USA the economic power of USA is still significantly larger than PRC. Of course even in that context I think the exchange rate method of comparison is flawed. My best example is that for a period of several months the dollar yen rate in 1995 was such so that the exchange rate GDP of Japan was actually larger than the USA. No one in their right mind would have argued that the economic power of Japan was greater than USA in 1995.
