Because overall, it is beneficial to China.

There are eight new ideas in the World Bank's revaluation

The results of the World Bank's International Comparison Program (ICP), the most eye-catching is that based on the World Bank's new purchasing power parity (PPP) calculation , China’s past GDP has been overestimated by nearly 40%. The World Bank report assessed the GDP, per capita GDP, and PLI (price level index) of 146 economies, calling it "the most extensive and detailed effort in history." According to statistics from the "Economic Trend Tracking" research group of the Institute of Economics, Chinese Academy of Social Sciences, the World Bank report has eight new findings:

1. The United States, Japan, Germany, the United Kingdom, France, Italy and Spain are the seven A high-income economy, accounting for more than 46% of the world's total output; China, India, Russia, Brazil and Mexico are five developing economies, accounting for more than 20% of the world's total output.

2. The survey results are statistically more reliable for the two economies of China and India. The new method shows that China still ranks second in the world, accounting for about 10% of world GDP, and India ranks fifth, accounting for more than 4%.

3. Reduce China’s GDP by 40%. Non-oil exporting economies in Asia and Africa shrank by 33% and 25% respectively. But Asia still accounts for more than 20% of world output.

4. The United States, China, Japan, Germany and India account for about 50% of world GDP. Brazil accounts for 50% of the South American economy. Russia leads the CIS region, accounting for 75% of the total. South Africa, Egypt, Nigeria, Morocco and Sudan account for nearly 75% of Africa's GDP.

5. PLI shows: Iceland, Denmark, Switzerland, Norway and Ireland have the highest price levels. The United States ranks 20th in the world, lower than most high-income economies, including France, Germany, Japan and the United Kingdom. The lowest price levels are found in Tajikistan, Ethiopia, Gambia, Kyrgyzstan and Bolivia.

6. Measured by GDP per capita: The five richest countries are Luxembourg, Qatar, Norway, Brunei Darussalam and Kuwait.

7. Measured by per capita consumption: The five richest countries are Luxembourg, the United States, Iceland, the United Kingdom and Norway.

8. Comparison by investment expenditure: The United States accounts for 21% of the world's total investment, and China accounts for 18%. The 10 largest economies account for more than 75%.

Don’t take the World Bank’s revaluation too seriously.

First of all, there is a theoretical absence in the PPP standard itself. Gaibold believes that "the new PPP results will not affect the current exchange rate level, because the theory of PPP as the equilibrium exchange rate itself has flaws." And it is "not a good way to measure a country's potential military strength" and does not reveal a country's full strength. The "Economic Trend Tracking" research group of the Academy of Social Sciences believes that the purchasing power level mainly measures the purchasing power of currency in domestic products, while the foreign exchange rate mainly measures the exchange level between traded goods, and there is no absolute decisive relationship between the two. Therefore, PPP does not reflect the "real" exchange rate of a country's currency.

Secondly, different national conditions lead to differences. Due to the different consumption habits of various countries, there will be errors in using the same basket of goods to represent the different consumption structures of various countries. The foreign exchange rate will be restricted by various factors such as international politics, foreign exchange market, and trade conditions, which will also cause it to deviate from the equilibrium exchange rate in most cases.

Third, economic “unbalanced” differences. Calculated at internationally comparable prices, the proportion of my country's residents' actual consumption expenditure in GDP is higher than the nominal expenditure proportion, while the proportion of total fixed capital formation in GDP is lower than the nominal proportion. Because the price of my country's service items has been low for a long time, while the price of investment products has been high, the proportion of total fixed capital in GDP has remained high, while the proportion of service expenditures has been relatively low.

China is still a huge economy

The author believes that lowering China’s GDP has at least four positive implications:

First, it is more in line with China’s reality. According to an article in China Business News, although China’s GDP level has been reduced by 40%, the World Bank believes that China is still ranked second in the world. Li Daokui, director of the Center for World and Chinese Economic Research at Tsinghua University, said, "Other countries may re-understand China's actual production volume based on the results of the new PPP, but China is still a huge economy, and this is an unchangeable fact."

The second is to keep a clear mind. This revision shows that China's national strength is not as much as previously estimated. Gai Baode, a researcher at the Carnegie Endowment for International Peace in the United States, believes that "because China's medical services and machinery manufacturing levels have been overestimated, do not believe that China's living standards will soon reach the world's first level. This more accurate picture The China Economic Map illustrates why the Chinese government attaches so much importance to prioritizing domestic issues such as economic growth, public investment, pollution control, and poverty reduction." This helps us keep our heads clear and develop well and quickly.

Third, China has reason to reduce its international burden. Zhang Minqian, a professor at the School of International Relations, said, “The above results are generally good for China.” “Because in many international organizations, the responsibilities of each country are determined with reference to the level of national power measured by PPP. If the World Bank lowers China’s PPP, at least According to the regulations of these organizations, China's dues will be reduced."

Rethinking the RMB strategy

The fourth is to help restrain the rapid appreciation of the RMB.

European and American countries have always believed that China's real exchange rate is seriously underestimated based on purchasing power parity, because the purchasing power ratio between China and the United States of about 1:2 is much higher than the exchange rate of 1:8.2 at that time. From the current purchasing power level, The equilibrium exchange rate of the RMB is far less than imagined. Li Daokui said that "it will reduce outside expectations for RMB appreciation in the long term." Song Guoyou, a Ph.D. from the Center for American Studies at Fudan University, published an article in the International Herald Herald, arguing that “this can prompt developed countries to rethink their strategy of suppressing RMB appreciation.” “Since the 1980s, the prices of China’s food, real estate, medical care, and non-interchangeable goods and services have declined. If both prices rise sharply, the purchasing power parity of the RMB should decrease accordingly, by 40%. This adds new reasons for China to resist the appreciation of the RMB." The fact is that since the exchange rate reform, the RMB exchange rate against the US dollar has appreciated by 12.2% cumulatively. The purchasing power parity of the RMB has dropped by 40%, which supports China's legitimacy in rejecting the rapid appreciation of the RMB in terms of research methods. This can completely encourage developed countries to rethink their RMB strategies.

The author believes that the World Bank's revaluation may have a certain impact on the Chinese people's sentiment for a prosperous age, but overall, it is still beneficial to China. In the words of Dante, "Go your own way and let others tell you."

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