Tags
china, chinese, CIA Factbook, Economy, GDP, GDP per Capita, IMF, The Economy, World Bank
The big number from yesterday is China’s Gross Domestic Product (GDP), which is the value of all the goods and services the country produced in a year (2010 in my example). And as we discovered it’s not a very useful number because we can’t relate to it.
There’s a much smaller number that’s of far more use when it comes to understanding economies in general, and we get that number by dividing the big number by the number of people who live in the country to get what’s known as the GDP per capita.
Why’s that number more useful? Because it gives an indication of how much money (on average) per person that can be used to pay that person, and be spent on raw materials for their work and for all other “stuff” that goes on within the country – like hospitals, schooling, infrastructure, etc. the list is pretty much endless.
It’s only an indication because some countries spend more than they earn, for example the United States and the United Kingdom and that’s where a “budget deficit” comes from. Others spend less and have a “budget surplus” though that’s not as common as running a deficit particularly in Western countries.
So what’s China’s GDP per capita? Well that’s complicated because we don’t know exactly how many people live in China, and there are different estimates on how much money is in their GDP too. Best guesses put the population at around 1.3 billion (another big number, you’d certainly need a rather enormous beach to invite them to a BBQ) and the guesses which are most credible come from the IMF (The International Monetary Fund), the World Bank and the CIA Factbook, and in 2010 each of them came up with a different number for GDP per capita.
The IMF went with a figure of $5,184, the World Bank said $4,428 and the CIA said it was probably $4,400. Given that range I’m going to take $4,750 when I talk about GDP per capita in China from now on in.
I think we can probably all agree on one thing, $4,750 isn’t a lot of money – it may represent a significant sum in terms of our own lives but I’d guess that for some of my readers it’s less than one months’ wages. For the vast majority of the rest I would think it represents somewhere between 2 and 4 months cash at the most.
So the amount that China had in 2010 on average to pay someone’s wages, provide any social benefits, investing in schooling on behalf of their children, build roads and rail networks, develop hospitals and train people to work in them and so on… was probably less than $5,000.
In those circumstances $5,000 doesn’t go very far, in fact it’s useful to compare this number to some other countries so you can get a feel for where it fits in the “global” picture.
Countries with higher GDP per capita at the lower end of the scale include Azerbaijan (around $7,500) and Botswana (around $8,900) and as we head up the scale we find South Korea (around $27,500), the United Kingdom ($39, 600), the United States ($48,150) and right at the top we find Qatar ($98,000) and Luxembourg ($122,147).
In fact in real terms China was ranked (depending on which of the three estimates you take) as between the 90th and 99th richest (per person) country on earth in 2010. That’s nowhere near as scary is it?
You can see that for Chinese people to share the same quality of life as we have in the UK or in the US their economy needs to be between 8 and 10 times larger than it was in 2010.
Tomorrow I’m going to look at this small number and use it to explain some bigger (and smaller) numbers that are also used to put the frighteners on in the West.
soccernorsk said:
Very helpful to get my thick head around these figures.
THanks!
shardsofchina said:
Thank you. 🙂
Nate said:
That doesn’t seem like a lot of money if I were to live in the U.S., but in China I think I could survive quite easily. With that said, I just hope I don’t have to pay for a car, health care, school, etc. Might get a bit tighter after that. Great Post, you always get my gears turning.
shardsofchina said:
Thanks Nate, but don’t forget $5,000 isn’t what the average Chinese person gets, what they get is that number minus all the average expenses etc. which sadly is a much smaller number – and one I’ll be covering in a bit.
But you’re right in that $5,000 outside of the Tier 1 cities is a good living wage on the border of being middle class for most places in China.
Nate said:
I’m glad you said so, because I did not remember that. Well then all I can say is…ouch. My western ways would get the best of me in a hurry, even on $1.50 noodle dishes.
shardsofchina said:
Here in Shenzhen, with moderate family commitments (I don’t have children but my wife does from her previous marriage) – we need about $2,000 (USD) a month to survive, and that’s living very modestly by Western standards. And I know there are people living here on less than $200 (USD) a month (in some cases it’s a lot less than that too) but it’s beyond my comprehension as to how they manage that. I don’t eat out in fancy restaurants, do go out for a few beers every now and again and eat a relatively low quality but cheap diet – I don’t spend much on clothes because I had loads when I came to China from Saudi, my wife spends a bit more but not much. I really don’t quite get where it all goes… but it does nonetheless.
Nate said:
Sorry if this is a long dialogue. For my family of 3 (Me, Wife & Monster) we pay about $450-$600 a month for everything. This includes chocolate bars and bacardi breezers every once in a while. Joking aside, our biggest expense is food. We make elaborate meals that often includes a touch of imported western junk. If we were to scale it back we would probably be at a solid $400 a month. Rent is cheap, which probably isn’t the same where you are. Probably just a difference in location…lots of farmers/peasants here, so we tend to pay the same prices.
shardsofchina said:
Long dialogues are cool. 🙂 My rent is $500 a month, so if I lived on your budget we wouldn’t eat. 😉
The fees for my wife’s daughter’s schooling and other associated stuff like books, clothes, living, etc. come in at $500 a month too.
Our bills average at about $60 a month for building security, heat, light, etc.
I spend about $15-20 on an average day, which includes my Starbucks vice and cigarettes so there are savings to be made there – but not dramatic ones.
So that’s $450-600 a month including Starbucks, Food, Drinks etc.
My visa runs us another $50 a month – I have a business visa which I pay a big premium for the renewal on because it’s cheaper than leaving China and Hong Kong to do it another way.
And my wife’s spending probably runs us another $10 a day. So that’s $2,000 without much in the way of places to conserve cash, and though I could quit Starbucks I work from home and it’s the one hour of the day I get out and about – so it doesn’t appeal much.
Nate said:
Thats not that different… minus schooling and habits. If we had a starbucks that was closer than 2 hours away, we might have the same cost of living. As always, I’m up too late. Looking forward to next post.
Basti_in_China said:
Plus China has a more unequal income distribution compared to Europe or the US. China’s gini coefficient is somewhere in the .40s compared to the .20s in Europe. That means while there are a small minority, still large in absolute numbers due to the country having a population of 1.3 billion, with a lot of spending power, the majority has to live on just a few bucks a day. China still has a long way to go……
shardsofchina said:
Completely agree and while it’s not published yet (it will be on Tuesday) I’ve already written a post about inequality of income too. Thanks for commenting. 🙂
Courtney Mara said:
Your blog is great! Great information!
Courtney Mara
http://CourtneyMara.com
shardsofchina said:
Thank you Courtney. 🙂
Craig Hill said:
A well considered piece of writing, and pretty much points to the reality. The fact is, the Chinese are the only ones that believe this hype. Outside China’s borders, nobody takes it seriously.
shardsofchina said:
Thank you for your kind words but I don’t know that it’s not taken seriously elsewhere – I think there’s a certain section of the more right wing media that’s gearing up to blame China for everything, in the hopes of a new “cold war” as it were. In times of hardship people often look for someone else to blame. And there’s also a lot of attention on China’s growth rate as a way of proving that somehow our own economies are deficient (which is something I touch on tonight).
Thank you for stopping by to comment. 🙂
beaufortninja said:
Great job of breaking this down. If only the media would report this instead of trying to scare people about China’s “imminent world domination”.
shardsofchina said:
Thank you, I understand why they don’t report this though – it doesn’t make for much of a story does it? China “breaks into top 100” richest nations on earth, but only just – won’t bring in readers hungry for ridiculous numbers sadly.
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