China's economic muscle 'shrinks'

[Crvena zvezda]

China's economic muscle 'shrinks'

Despite China's boom, tweaks are needed to keep it running smoothly
China's economy, the world's second largest, is not as big as was thought, a report by the World Bank has claimed.
According to the bank, previous calculations have overestimated the size of China's economy by about 40%.

The revelation came after the bank updated the way it calculated the country's gross domestic product (GDP).

The bank said the findings meant China would not become the world's biggest economy in 2012 as forecast. It also meant China was poorer than estimated.

This in turn would influence future aid and investment plans, the World Bank said.

China gains extra aid from international institutions and has asked for help in climate change talks because of its status as a developing country.

Based on the World Bank's new research, China's economy is now worth some $5.33 trillion (£2.64trillion). Despite the drop in size, the economy was still the world's second largest, the bank said.

The US, at $12 trillion, is the world's largest economy.

The method used for the calculations is called "purchasing power parity", and corrects for differences in prices, which are lower in China than in Western countries, for the same goods.

http://news.bbc.co.uk/2/hi/business/7148695.stm