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Tuesday, July 31, 2007

China lagging in economic well-being

China lagging in economic well-being - ADB

Updated: 2007-07-31 16:29

MANILA -- China and India, the two economic powerhouses in developing Asia and the Pacific, are lagging in terms of economic well-being and living standards of their population, a new study undertaken by the Asian Development Bank ( ADB) showed.

China and India account for 64 percent of total real gross domestic product (GDP) of the 23 economies participating in the study, according to "the International Comparison Program (ICP) in Asia and the Pacific: Purchasing Power Parity Preliminary Report" released on Tuesday.

However, a completely different picture emerged if the size of these economies was adjusted by population, said the study. Rather than dominating the rankings, China and India droped to 10th and 18th positions, respectively, out of the 23 economies participating in the full GDP comparison.

Similarly, China ranked 15th and India ranked 17th when economies are compared based on "actual final consumption of households" (AFCH), a better measure of economic well-being of the population.

The AFCH is a measure of what households actually consume, comprising what they purchase and what they are supplied for individual use by the government (principally education and health) . The economic well-being of the population is obtained by comparing household consumption expenditure per capita.

The five economies that top the list are Chinese Hong Kong with HK$125,303 (US$16,044) per capita; Chinese Taipei with HK$109,108 (US$13,980); Singapore, HK$99,706 (US$12,766); Brunei, HK$81,744 (US$10,466), and Chinese Macao, HK$67,639 (US$8,660).

The five economies that are at the bottom of the survey are Nepal, Bangladesh, Laos, Cambodia, and Vietnam.

As for the people living in the two giant economies, a person living in China spends an average of only HK$11,502 (US$1,473) per year, while an Indian consumes an average of HK$9, 346 (US$1,197) per year.

Purchasing Power Parities (PPP) is an idea popularized by The Economist's Big Mac Index which prices hamburgers in global cities for a quick and crude comparison of living standards.

Based on the Price Level Index (PLI), which is the ratio of the PPP to the exchange rate, Fiji Islands and Chinese Hong Kong are the two costliest places to live in. They are followed by Chinese Macao, Singapore, and Chinese Taipei.

China ranked eighth, and India ranked 16th in terms of PLIs. Price levels in the Philippines, Thailand, and Indonesia are very similar and are close to the Asian average.

The cheapest places are Laos, Vietnam, Iran, Cambodia, and Nepal.

"The results provide the most comparable information on breakdown of GDP expenditures across the Asia Pacific," said ADB Chief Economist Ifzal Ali.

"Purchasing Power Parities are a more appropriate currency converter to compare living standards and the structure of economies than market exchange rates," he said.

The ICP Asia Pacific is part of a global initiative managed by the ADB in collaboration with the ICP Global Office and other regional agencies across the world. The ICP results, for the first time, enable a robust cross-country comparison of major macroeconomic indicators across diverse economies of Asia and the Pacific.

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