Is China now number one? (2012 edition)

Each year I have done a post discussing the issue of when China will have the world’s largest economy.  Lester Thurow says it won’t be until the 22nd century; I say it may have already happened.

Just to be clear, there is no “fact of the matter,” just as there is no fact of the matter as to whether China or the US is larger in terms of square miles.  It’s what my students would call “merely a matter of opinion.”  But let’s see if I can persuade some of my peers that China has the world’s largest economy in 2012.  Here’s some estimates for 2012 that I found in The Economist:

Country               GDP              PPP GDP

US                   $15,604bn     $15,604bn

China              $8,130bn       $12,327bn

Hong Kong       $262bn             $373bn

Taiwan             $518bn           $1,007bn

Hong Kong and Taiwan figures are not included because I think they are “really part of China” (although Hong Kong really is part of China.)  Instead, I’m puzzled by the PPP conversions of the three countries.  Notice that the PPP GDP for China and Hong Kong are each about 50% larger than the nominal figures at current exchange rates, whereas for Taiwan the PPP figure is roughly double the nominal figure.  I’ve never been to Taiwan, but I have trouble imagining how this could be correct.

Taiwan is a very rich country, with a per capita GDP (PPP) roughly half way between Japan and the US.  How can their cost of living be much lower than that of China?  A very nice haircut in Beijing cost me $2.25 in 2009.  You can ride in a taxi for 15 minutes for $3.  Restaurant meals are very cheap.  Grocery store prices are quite low.  A first class high speed rail ticket from Beijing to Tianjin (325 mph) is $10.  Since wages are only a small fraction of US wages, lots of services are dirt cheap by US standards.  It’s possible that the cost of living is far lower in wealthy Taiwan, as the Economist magazine claims, but I find it implausible.  I am sure some of my readers travel to both places, so I’d be interested in your thoughts.

A few years ago the World Bank estimated the Chinese cost of living to be only 1/3 of US levels.  Then they re-did the computation and found the ratio was 1/2.  Even at that ratio China would have a larger economy than the US right now, even without including Hong Kong.  Indeed that would still be true if we assumed the Taiwanese price level also applied to China.

I am pretty confident that Chinese prices are actually lower than Taiwanese prices.  I’m less confident that the Economist’s estimate for Taiwan is correct.

The newer World Bank numbers were criticized because the focused on prices in urban China, which are much higher than in the countryside.  Most of my experience has been in urban China, so my sense of the Chinese cost of living is probably too high.  But even in urban China I would find an estimate of 1/2 US prices to be quite plausible.  Of course the two consumption bundles are so different that there is no right or wrong answer, it’s subjective.

So China might well be number one already.  If not, I’ll come back in 2013 with even stronger arguments.  By the way, they are already number one in food, clothing, new housing construction, cars, steel, cement, coal, exports, cell phones, etc, etc.  Often they have huge leads over the US.

Off topic, but a few months back I did a post pointing out that the combined current account surplus of the “Nordic bloc” (Norway/Sweden/Denmark/Holland/Germany/Switzerland), was nearly 50% more than China’s surplus.  Recall that old Keynesians like Paul Krugman think current account surpluses depress world AD and cost jobs in America.  That’s true whether they occur naturally or due to government policy.  BTW, both the Nordic and Chinese surpluses are partly natural and partly a result of explicit government policies to encourage saving.

I just checked The Economist, and the new figures are even more lopsided:

China:  $259.3 billion CA surplus

Nordic bloc:  $484.0 billion CA surplus.

That slave labor in the Nordic bloc is stealing all our jobs!  If I was an old school Keynesian protectionist I’d be worried right now that the Nordic bloc was a sort giant blob that was sucking all the life out of the world economy.  Especially Norway and Switzerland, which combine for more than $165 of the surplus, despite having only 1/10th of the Nordic bloc population, and 1/100th of China’s population.  But I’m not an old school Keynesian protectionist, so I’m not worried at all.  Go ahead and book that ski trip to St. Moritz, and don’t feel guilty about it.

PS.  The IMF says the US price level is 75% higher than Taiwan’s.



32 Responses to “Is China now number one? (2012 edition)”

  1. Gravatar of Morgan Warstler Morgan Warstler
    14. January 2012 at 14:01

    Morally, PPP is uninteresting, what matters is according to Rawl’s what is the lifestyle of the folks at the bottom…

    Since the US beats everyone else at that mark (none of you moaners about Euro Singapore health care), we have very little by way of obligation.

    As too size itself, China rocks, hopefully someday their GDP will not simply reflect their population.

    As too PPP, ToT in Thailand is able to provide unlimited 3G wholesale coverage (of course 3G is 5 year old tech) for 200 baht ($6).

    Labor really is the real cost, which is why I find it so fascinating that more folks don’t rally around the idea of what we get from lower wages.

    I don’t think it is money illusion, I think it is because we don’t auction the unemployed. 30m doing super cheap odd jobs would convince 60M buyers not to freak out too much.

  2. Gravatar of Torgeir Hoien Torgeir Hoien
    14. January 2012 at 17:04

    “That slave labor in the Nordic bloc is stealing all our jobs” Funny line.

    Sadly, although Norway probably has the mother of all CA “imbalances”, it’s quite common to read complaints here about China’s CA “imbalance”.

    This is older than Old Keynesianism; it’s ancient mercantilism and pre-historic tribalism.

  3. Gravatar of Benjamin Cole Benjamin Cole
    14. January 2012 at 18:11

    Interesting post.

    It also interesting that China has become such a huge consumer of commodities, and practices a pro-growth monetary policy.

    Yet the Fed thought it could crimp commodities inflation by restricting the domestic money supply of the United States (2008).

    Not much permanent happened on commodities, but we had the Great Recession.

    We are not the world anymore.

  4. Gravatar of Robert Simmons Robert Simmons
    14. January 2012 at 18:30

    I’m sure I’m wrong here, but isn’t PPP the wrong way to compare these things? It seems like PPP is good for looking at per capita numbers, to judge living standards, but that for judging what is the biggest total economy, you should use the actual exchange rate.
    Also, why is “there is no fact of the matter as to whether China or the US is larger in terms of square miles”?

  5. Gravatar of Richard Warfield Richard Warfield
    14. January 2012 at 22:28

    I agree that the PPP conversions seem way off, but not for the reason you believe. Those PPP GDPs per capita for Hong Kong and Taiwan are too high.

    The notion that Hong Kong’s cost of living is lower than that of the United States would be ludicrous on its face to anyone who has lived in both places. Real estate prices are the big reason (on a like for like basis Hong Kong homes are roughly 2x as expensive as in New York) and feed into high costs for many other goods and services.

    I know less about Taiwan, but am certain most Taiwanese would not believe for a second that Taiwan has living standards half way between Japan and the US. Taiwan is an expensive place (though much cheaper than Hong Kong) and nominal incomes are quite low.

    As an American who has lived alternately in the U.S., China and Hong Kong for many years I do not see China as being obviously cheaper than the U.S.

    Few products in a normal consumer’s basket are pure services like haircuts. We can try to compare CPI components that are large in both countries, such as:

    – Shelter: rents are cheaper in China, but purchase prices are often cheaper in U.S., at least in urban areas. Prices in rural areas are difficult to compare because of huge quality differences between the countries.
    – Food: difficult to compare because of different products in the two baskets, but not at all obvious that China is cheaper, for example see this WSJ article:

    there are also major quality differences; mass deaths from tainted food are a fairly frequent event in China.
    – Transporation: Purchasing a car in the U.S. is much cheaper, though public transport in China is cheaper and better
    – Consumer durables: Law of One Price holds pretty well as these can be traded

    I don’t see broad based “standard of living” comparisons as being feasible across countries as disparate as the U.S. and China.

  6. Gravatar of gnikivar gnikivar
    14. January 2012 at 23:12

    First, not sure where you numbers are coming from. In 2010, China had a trade surplus of about $180 billion. That’s down to about $155 billion. The data comes from Chinese customs via UN commtrade database.

    As far as China stealing American jobs is concerned, a second problem is a missatribution of the source of the trade deficit. Right now China runs a massive trade deficit with Taiwan, Singapore, Korea Japan and a several other countries in high value components. China assembles those compnents and exports them to the US. In reality, a huge chunk of the US trade deficit with China comes from these other countries.

  7. Gravatar of Rob Rob
    14. January 2012 at 23:20

    I type this from Shanghai during the end of my third week here of four. This is a provocative and interesting post, and, as someone who has been eating probably too well for less than $10 a day, I find the PPP argument plausible. (By the way, the Taiwan comparison smells simply wrong to me too, but it’s been 5 years since I’ve been there so….).

    Of course, PPP GDP sounds like an OK measure until I buy a large, no frills coffee at Starbucks for $4.50. Then I begin to wonder. As you point out, the potential bundles of consumption are so diverse, and if one includes a branded consumer item then forgetaboutit. In fact, China Daily pointed out the other day that many middle income families are willing to go deep into debt for the prestige of purchasing things like Levi’s….

    I do think this raises the question of where the respective GDP’s will be in five years time. Some of us can (barely) remember a time when the NIKKEI was around 6X the Dow. I have to say that things feel a bit spooky to me right now. There is quite a bit of concern among academics I’ve talked to and even in the general population about consistently narrowing trade surpluses (imports are growing faster than exports) and the potential for recession in Europe. At the same time, it appears that China is working as fast as it can to solve known problems of too little domestic consumption, pollution, lack of innovation, capital markets access restricted to the largest companies, the inefficiencies of the hukou system, public corruption,the (new) experience of net capital outflows, runaway real estate prices, etc.. What I take to be high level assumptions of many that things will work out because: 1) the population is so large and industrious; 2) the government is smart; and 3) people are compliant enough that rapid change is possible; are yet to be proved, in my opinion.

    I also have to say that the one that worries me the most as an American circa 2007-2012 is the initiatives with respect to real estate. On the one hand, the government is taking a variety of measures to cool the market and has justified tighter money on this basis (sound familiar?). On the other hand, there is a mandate from Beijing to build over 30 – 40 million (depending on what you read) low income apartments (paid for, I understand, by local governments and banks) in order to both quell social unrest and buffer the softening of the economy.

    This sounds like a big number to me, although maybe it’s not. But if it is, what happens if they don’t get filled? Or, what happens if they do get filled by crashing the middle end of the market? What am I missing?

    I have a lot of respect for the China’s that I’ve known and the China that you read about. I hope for everyone’s sake that my own uneasy feeling about the path from here is unfounded. But as we say in my country, past performance is no guarantee of future results.

  8. Gravatar of Rob Rob
    14. January 2012 at 23:41

    By the way Richard Warfield, that WSJ article on food prices is based on press in China, and I flat don’t believe it. My quest for tomorrow in Shanghai is to price out banana’s and green beans. Will let you know.

  9. Gravatar of ssumner ssumner
    15. January 2012 at 06:25

    Morgan, If PPP doesn’t matter then nominal exchange rate changes must correlate with some pretty big real GDP changes. Did Canada suddenly become richer than the US in the last few years? Just at the moment it’s exchange rate appreciated? It is richer at market exchange rates.

    Torgeir, Yes that’s a good comment about tribalism. I’m increasing convinced that we view the Europeans as “us” and the Asians as “the other.”

    Ben, Yes, we are certainly not the world anymore. China is supposed to depend on exports to the US and Europe, and yet they’re booming despite a very weak economy over here.

    Robert, There’s no fact of the matter about country size because people don’t agree as to where China’s borders are. Some books say China’s bigger, some say America’s bigger.

    Whatever technique you use for per capita GDP should, be used for today GDP. You definitely want to be consistent.

    Richard, You had me convinced until this:

    “As an American who has lived alternately in the U.S., China and Hong Kong for many years I do not see China as being obviously cheaper than the U.S.”

    I’ve traveled all over China, and everywhere I’ve been is far cheaper than the US. You mentioned the price of housing being higher, but it’s cheaper in Beijing than New York. Most things in China are far cheaper. Even prices are lower, but rental equivalent is a better comparison, and that’s way lower.

    I’ve also been to Hong Kong, and I’m not even sure I agree with you there (except housing, which is much more expensive, as you say.) I’ll bet health care is cheaper in HK, restaurant meals are far cheaper. Goods in stores are mostly cheaper.

    But my big disagreement is mainland China. You can live there very comfortably for $10,000/year. Try doing so in the US for that income level. So I can’t buy your analysis.

    gnikivar, I was using CA deficit numbers from The Economist magazine, not trade deficit numbers. These are the numbers Krugman cites.

    I think everyone, including Paul Krugman, agrees that bi-lateral deficits are completely meaningless.

    Rob, You want to make sure you pay local Chinese prices, not tourist prices (near big international hotels.) I stay in a regular apartment in a regular neighborhood when visiting China, and see absurdly low prices for almost everything. I visit the grocery stores where Chinese people shop. Anyone who tells you food prices in China are higher is completely uninformed.

  10. Gravatar of ssumner ssumner
    15. January 2012 at 06:56

    Rob, Thanks for all those comments. I think it’s fair to say that the Chinese can adjust to rapid change. The country has changed more in 30 years than American changed in 100 years.

    Long term I expect China to become developed, like the rest of East Asia. There may be an economic crisis of some sort along the way–those are difficult to forecast.

  11. Gravatar of Morgan Warstler Morgan Warstler
    15. January 2012 at 07:13

    Scott, I didn’t say PP didn’t matter, I said it was morally uninteresting.

    I think it is fascinating that ToT can sell cell phones service for $6 per month (wholesale), that’s using the name brand Samsung et al towers backhauls etc.

    It really means the cost difference is labor cost. Getting guys to climb up towers is expensive.

    BUT, “morally” it is uninteresting, because the lifestyle of US poor is better, greater than the poor elsewhere and PPP tends to smudge that up.

    And please don’t make some silly assertion about healthcare etc. in Sweden. The basic rule is if you have to be poor, do it in the US.

  12. Gravatar of mbk mbk
    15. January 2012 at 08:06

    Scott, I’m a long time disbeliever in standardized international statistics. There are just too many oddities where my experience on the ground just does not square with the numbers from well respected entities. Example, once again Singapore, your Economist housing indexes of a few posts back show a moderate and even appreciation over the last 5 years, experience on the ground is that everything absolutely went off the charts in rollercoaster fashion. Same with PPP per capita GDP in Singapore, supposedly world’s highest now according to some, and I am scratching my head.

    I suspect that these one size fits all indices and baskets of goods just don’t work when in some countries entire sectors of the economy are either not priced to market or subject to significant regulation and barriers to entry. I can tell you exactly which basket of goods you’d need to make Singapore look like one of the cheaper places of the developed world to live in, and to live well, and which one you’d need to make it look like a more expensive place than NYC. Depending on the choice you’d believe that the average worker can’t afford squat, or that he’s well off for amazingly cheap.

    My working assumption is that these international stats only work in the aggregate. Any individual country is probably vastly misrepresented in some way. But, if you look at a point cloud you can still make some useful comparisons of trends. Just don’t make pairwise comparisons that way – for this you need specific papers that specifically address a country pair.

    I also second Morgan: wages and what you get for average wages, would be sociologically much more interesting to compare than GDP. Say, the kind of indices that measure sq ft living space rent per hour worked, or mid size car per hour worked.

  13. Gravatar of StatsGuy StatsGuy
    15. January 2012 at 08:25

    You got pinged on seeking alpha –

    I’m surprised you don’t rely on any of a dozen other metrics to make your point… electricity consumption, steel production, autos, etc. One can argue the economy is moving toward an IP economy, but China’s patent portfolio also grows – 307k in 2010 (latest data) vs. 415 in US, with the US stable or possibly declining and China’s patents growing at >50k YoY.

    BTW, why do you include Germany in the “Nordic” countries? That’s very odd, and probably distortionary. Germany was ~160 billion euro as I recall, or >220 billion USD at average 2011 exchange rate. Of the rest, a good chunk – maybe >60 billion – is oil production. It’s a very odd comparison you make.

  14. Gravatar of StatsGuy StatsGuy
    15. January 2012 at 08:32

    Comments above raise a good point vis a vis land prices – you are focused on PRESENT CONSUMPTION, not future consumption, which is a difficult comparison to make because of vastly different savings rates (whatever savings is) and expected growth rates.

    Also, you should note that in the EU there is a HUGE controversy over the German export model ‘stealing’ jobs elsewhere in Europe. Perhaps your point is that the US is focused heavily on bilateral, rather than multilateral, trade balance?

  15. Gravatar of Robert Simmons Robert Simmons
    15. January 2012 at 08:44

    You haven’t really convinced me on using PPP for total GDP comparisons. If you mean living standards per person times the number of people, yes, but that doesn’t seem like a very useful concept. If you mean something like combined economic might, which is a much more interesting concept, why would you use PPP?
    So, you’re right that a fact of the matter there is no right answer as to which economy is larger, but I don’t see how your definition should be preferred. Is PPP a good leading indicator?

  16. Gravatar of Benny Lava Benny Lava
    15. January 2012 at 09:41


    I appreciate your view regarding China vs the Nordic countries. However I would caution you to look at this from the standpoint of a US laborer. Their jobs aren’t likely going to go to a Nordic country as they are China. In fact the reverse is more likely; Nordic jobs outsourced to the US. See here:

    It is all about jobs!

  17. Gravatar of Benny Lava Benny Lava
    15. January 2012 at 09:48

    Also I find the question of China vs the US in a GDP comparison to be academic. Numbers from China are unreliable. I wouldn’t doubt that their economy is now bigger or will be soon. They have a billion more people. In fact they became the #1 new car market back in 09.

  18. Gravatar of Tommy Dorsett Tommy Dorsett
    15. January 2012 at 09:54

    Scott – Does it worry you at all that China’s GDP is over 50% investment largely driven by construction and, until very recently, a massive, decade/long, liquidity/credit expansion. Call it an Austrian nightmare. If their investment growth simply levels out, as it inevitably will at some point, they will lose more than half their GDP growth. It may already be happening. But at least they are 21 percentage points from the ZLB…….

  19. Gravatar of happyjuggler0 happyjuggler0
    15. January 2012 at 14:05

    PPP per capita GDP in Singapore, supposedly world’s highest now according to some, and I am scratching my head.

    I believe for most countries that per capita GDP (PPP adjusted of course) is a reasonable proxy when comparing per capita income between countries. However there are exceptions, such as Luxembourg, Ireland, Norway, and by the sounds of it, Singapore. Being a manufacturing and/or finance and/or oil rich tiny country generates an extremely large amount of production of wealth that raises the ratio of corporate gross income relative to domestic personal income. This royally distorts per capita GDP (PPP) numbers relative to countries with a more “normal” amount of investment.

  20. Gravatar of ssumner ssumner
    15. January 2012 at 14:52

    Morgan, If you have to be poor and want a big house, do it in the US. In other respects I’m not so sure.

    mbk, In a sense that was the point of my post. While the official numbers suggest the US has a bigger economy, when I visit China it sure seems like they have a bigger economy.

    Statsguy, I put “Nordic” in quotes because it also includes Germanic countries like Germany and Switzerland. The other five countries have a current account of nearly $300 billion, so it’s by no means an exclusively German phenomenon. It’s a north of the Alps phenomenon.

    One of the commenters from Norway (above) says that even there people complain about the Chinese CA, and Norway has a $70 billion surplus with just 5 million people. So it’s not just an American obsession. The EU is much more likely to put tariffs on Chinese goods than Norwegian goods.

    Robert, You said;

    “You haven’t really convinced me on using PPP for total GDP comparisons. If you mean living standards per person times the number of people, yes, but that doesn’t seem like a very useful concept. If you mean something like combined economic might, which is a much more interesting concept, why would you use PPP?”

    I don’t follow. The euro went from 85 cents in 1998 to $1.60 in 2008, despite the US and Europe having similar inflation rates. Do you believe the European “might” doubled relative to the US? How would that show up elsewhere?

    Benny, You said;

    “I appreciate your view regarding China vs the Nordic countries. However I would caution you to look at this from the standpoint of a US laborer. Their jobs aren’t likely going to go to a Nordic country as they are China.’

    I think you could make the opposite argument. The stuff we buy from China we used to buy from Korea, Taiwan, etc. The stuff the Nordics and Germany export is really similar to what we export. Machines, chemicals, pharmaceuticals, aerospace, software, etc. Those are our competitors. Of course I don’t actually believe either are “stealing jobs.” The Fed and Congress are the only entities stealing US jobs.

    Tommy, I think it’s a given their growth will slow sharply over time. How could they possibly keep growing at 10% for many more decades? The world doesn’t have enough resources. So no, I’m not worried about the coming slowdown in Chinese investment. I expect them to level off at near Japanese levels, roughly 75% of US per capita GDP.

    happyjuggler0, I used to think that Singapore was like Ireland. But the new data shows it’s rapidly becoming more like Switzerland. They are super high savers, and are getting rich. (The Swiss have a national income that exceeds their GDP.)

    But yes, your point is a good one.

  21. Gravatar of Benny Lava Benny Lava
    15. January 2012 at 16:22


    I never said they were “stealing jobs”, which you imply I did.

    I agree that the US competes with the Nordics for machines, pharma, etc. But the US also competes with China and the rest of Asia for these things as well. But again, from the standpoint of a laborer Milwaukee Drill used to make their drills in America and today they aren’t made in America, but they aren’t being imported from Germany or Sweden, they are being imported from China. You should be cognizant of this viewpoint rather than simply dismissing it as racism.

  22. Gravatar of Robert Simmons Robert Simmons
    15. January 2012 at 19:41

    Ah, now we’re getting somewhere. I kind of do think that. Not that Europe’s economy has performed really well, but look at how US markets react to events in Europe now. It’s clearly way more important now than it was then. Partly that’s because there’s a wider range of likely outcomes there, but not entirely. I don’t believe that PPP would capture that.

  23. Gravatar of PJF PJF
    15. January 2012 at 23:10

    The comparison between the current account surplus of the Nordic Bloc and China is not valid because much of the exports from the Nordic Bloc countries go to each other, so they can’t be counted as net exports from the bloc. If you don’t exclude the intra-bloc trade, its like counting exports from Washington State to Idaho as part of the overall exports of the U.S.

  24. Gravatar of Election Watcher Election Watcher
    16. January 2012 at 00:12

    I haven’t been to China lately, but here are some prices in Taiwan. You can get a haircut in suburban Taipei for as little as $1.70, though a good one will be about $8. A 15-minute taxi ride in Taipei costs $4-5, and a subway ride is usually $0.50-0.70. A lunchbox in suburban Taipei runs about $2, in central Taipei $3, and a food court meal in an nice shopping center $4-5. Prices are even lower elsewhere in Taiwan.

    Western things (coffee, Western food, movies, etc.) are priced about the same as in the US, but they’re of course a very small part of the consumption basket there. Buying real estate is expensive (in Taipei only), but that doesn’t show up in the price index: mortgage rates and property taxes are low, and renting is cheap.

    I’d say that overall, a 75% price difference between the US and Taiwan sounds about right. The gap has actually been widening even as Taiwan grew: inflation averaged just 1% per year for the past 15 years, while the USD/TWD exchange rate remained essentially flat.

  25. Gravatar of Richard Warfield Richard Warfield
    16. January 2012 at 00:43

    Hi Scott,

    I absolutely understand how, travelling through China, you would get the impression that the cost of living in China is much lower than the U.S., but think you need to consider a few reasons why that impression may not be accurate.

    First, as a traveller you are not participating in many of life’s biggest expenses. Real estate in China is really expensive, particularly in a quality-adjusted basis (more on this in my next point). So is buying a car. Other consumer durables are not cheaper than in the U.S thanks to LOOP.

    Second, many of the quality differences between what’s available in China vs. the U.S. are not immediately apparent. Food is cheap — particularly restaurant meals — but the threat of foodborne illness or even chemical poisioning is all too real. An apartment in Beijing may be cheaper than one in Boston — but only once you move in do you realize that the walls are paper thin, there is no insulation, and the faint smell of sewage drifts out of the kitchen and bathroom drains when it rains (in my experience, pretty much the normal state of Chinese homes). For some goods and services, you cannot reliably get good quality at any price — which is why so many wealthy Chinese go overseas to Hong Kong or Singapore for medical care.

    Third — and this addresses your point about how living on US$10k per year is much more comfortable in China than in the U.S. — relative status matters a lot in terms of perceived well-being. Living in the U.S., everything around you would seem unaffordable. In China most goods would be in your price range — otherwise the shops would be empty as the vast majority of the population would be priced out.

  26. Gravatar of JG JG
    16. January 2012 at 10:50

    Cost for many things in Taiwan are cheaper than China mostly because of the differences in standards of living while having basic low-Masloff items being largely similar in price between Taiwan and China. The only things that are either comparable or slightly more expensive are high-Masloff items like luxury goods.

    And compared to the US both Taiwan and China are dirt cheap. Food is easily 4x-10x more expensive in the US than Taiwan. Transportation 4x-10x more for non-personal vehicles (public transit, taxis, trains, etc. which are so good in Taiwan that car ownership is largely unnecessary which is yet another major cost savings to any budget). Medical care is predictable, convenient and inexpensive even if you aren’t on the Taiwan national insurance. Without insurance you can still get basic healthcare from any doctor you walk into for $10-15 including meds: e.g. colds and basic preventative care. It’s cheaper with health insurance and more expensive things are covered as well.

    I’m an American living in Taipei and I frequently travel to China for business. I prefer Asia to the US because for the same income in the US you are gang-raped and sodomized with infrastructure stupidity (all suburbs and no mass transit), unnecessary fees and middlemen costs living so your standard of living is needlessly and radically far lower.

  27. Gravatar of ssumner ssumner
    16. January 2012 at 11:47

    Benny, I don’t think I said that everyone who worried about Chinese trade is racist, I certainly don’t believe that. But I do think race plays a role in the fact that you never hear US politicians complain about the huge CA surpluses in northern Europe.

    Off topic, but I read that Japan had a trade deficit last year.

    Robert, I think it’s because of the big crisis in Europe, not because of the level of the euro.

    PJF, No that’s wrong, as one country’s import is another country’s exports. Maybe another commenter can explain it better. Don’t forget each countries CA surplus is net saving over investment, that might help see it clearer.

    Election Watcher, Glad to hear that–it makes me even more convinced I’m right. And good for Taiwan, with those prices they really are a pretty rich country. Someone should do a comparison with Switzerland!

    Ricahrd, Those are all good points, but I think your last paragraph really nails down why comparisons are so difficult. In sheer volume terms there’s not much doubt that China produces far more. But the quality is lower (believe me I did notice that.) So it’s hard to compare–actually impossible.

    BTW, I’ve also seen quality in China soar in the past 15 years. The newer housing is far better. I’ve never gotten sick eating Chinese food, although I don’t doubt it happens fairly often.

    JG, Taiwan sounds really nice.

  28. Gravatar of Doc Merlin Doc Merlin
    17. January 2012 at 06:18

    “It’s possible that the cost of living is far lower in wealthy Taiwan, as the Economist magazine claims, but I find it implausible. I am sure some of my readers travel to both places, so I’d be interested in your thoughts.”

    Properly free microeconomic systems will have lower cost of living than tightly restricted ones at the same levels of income.

  29. Gravatar of ssumner ssumner
    17. January 2012 at 17:09

    Doc, Good point.

  30. Gravatar of Joe S Joe S
    20. January 2012 at 04:55

    I was recently forwarded this article which takes the opposite standpoint regarding China’s economic progress:

  31. Gravatar of ssumner ssumner
    21. January 2012 at 13:56

    Joe, I usually don’t read links unless there is a summary of the contents. How is he opposite, is he claiming China has a lower cost of living than the US?

  32. Gravatar of Joe S Joe S
    22. January 2012 at 12:58

    The author is Jeremy Kolassa. Most of his essay is political in nature, but he does highlight two things regarding China’s medium-term economic prospects that I found interesting:

    1) The large (government) mis-allocation of resources into things like the “ghost city” of Kangbashi, designed for a million people with only 20,000 residents to date. He argues there’s a real estate bubble in the making that will dwarf 2006-08 in the US.
    2) The demographic issue following China’s one-child policy. He discusses both the future impact of an aging population and the lopsided male-to-female ratio – both of which he believes will have major societal and economic consequences over the next couple of decades.

    Overall he believes China’s future is bleak and that the focus on China’s global dominance in the US is a product of political necessity to be tough on China.

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