World Bank Finds China's Economy 40 Percent Smaller Than Thought

This is the VOA Special English ECONOMICS REPORT.

China has one of the world's fastest growing economies.  In two thousand seven, the Chinese economy grew by more than eleven percent for most of the year.

But recently the World Bank announced that the Chinese economy was smaller than had been thought.  The World Bank released its International Comparison Program report on December seventeenth.  It said that the size of the world economy had been overestimated.  And it found that the total value of goods and services produced by China had been overestimated by forty percent.

The World Bank used new tools to compare the economies and buying power of people in one hundred forty-six countries.  This year's report marked the first time that China took part in the World Bank's International Comparison Program.

The World Bank says China is the second largest economy after the United States by its new measurements.  But the revaluation has caused experts to reconsider economic progress in China.

It also raises questions about the exchange rate of Chinese money.  Critics have long argued that China should let the value of its money rise freely against the value of the dollar and other currencies.  It may be that Chinese money is not undervalued if the Chinese economy is not as large as once thought.  However, some experts point to other economic statistics to argue that China's money is undervalued.

China faces other problems as well.  Inflation hit an eleven-year high in November.  The country's huge trade surplus reached a record two hundred thirty-eight billion dollars in the first eleven months of this year.  This has raised tensions with trading partners, such as the United States and the European Union.  And China has been criticized for permitting its manufacturers to produce unsafe products.

Two thousand seven marks another event for China's economy.  It is the first year in which China invested more money in foreign countries than foreign countries invested in China.  The Wall Street Journal says Chinese companies and the government invested over twenty-nine billion dollars in foreign companies.  Investors from the rest of the world invested less than twenty-two billion dollars in Chinese companies this year.

And that's the VOA Special English ECONOMICS REPORT, written by Mario Ritter.  Transcripts and archives are at voaspecialenglish.com.  I'm Steve Ember.