[lifeisstillgood]

Very roughly :

US GNP $21 Trillion China $14 Trillion

Using PPP US $21 Tn (obv) China $28 Tn (!!!)

China can buy more stuff from itself each year than US. It just cannot buy the most sophisticated stuff yet.

This is presumably why the report puts "reshoring" and building out 21C manufacturing top of its priority list.

source:https://podcasts.apple.com/gb/podcast/macro-musings-with-dav... (worth listening too !)

[lumost]

This seems to imply that one party or the other is manipulating the currency markets aye? the claim is effectively that $1 when converted to local currency in china buys 2x what $1 buys in the US.

[Nowado]

Not really, why?

There are a lot of things that go into pricing of a purchase. Especially large scale purchase of cutting edge military technology with long time horizons by state actors.

[lifeisstillgood]

Yes thats the point of PPP. I found it counter intuitive for ages, but might have got it now.

Think of it as if 2 bucks buys you 1 loaf of bread in Chicago, but take those two dollars to Beijing, turn it into yuan at the prevailing exchange rate, and that buys you 2 loaves of bread in Beijing, then very roughly speaking China can take 50 million dollars worth of yuan, and buy two jet fighters for the price USA pays for one.

It varies of course, when you look at shipbuilding capacity, in that China probably has a huge cost advantage in that they, you know, build ships a lot. Vice versa Jet fighters.

As ever it depends greatly on the basket of goods - which is naturally bent towards consumer and FMCG.

The Economist runs a Big Mac index - a trivial but effective means of doing the same - how much does a Big mac cost in different cities. (https://www.economist.com/big-mac-index)

[lumost]

The part that bothers me is that this discrepancy butts heads with the idea of comparative advantage. Somehow every economy which is heavy on imports has a higher overall cost level than peer economies that are not import dependent (see Hawaii). While in theory some of these import dependent economies are powered by comparative advantage (e.g. pork, and coffee growing in Hawaii) - the dominant term appears to be the imports for the average basket of products.

Is China's cost level lower because a local supply chain inherently more efficient and advantageous than an external supply chain? When does an external supply chain actually make sense? If there are some markets which are winner takes all, then is the economic theory more about "do you make it or do I?" rather than a smooth supply/demand/cost curve with comparative advantage.