Standard metrics understate China’s physical investment gap with the US and its wider economic influence, researchers say
The analysis, published in a note on Sunday, far exceeds estimates based on commonly used international metrics and comes as Beijing seeks to further expand its economic and financial influence.
“China’s contribution to global growth and the spillover effects of its economic fluctuations are both likely to be insufficiently understood,” the authors wrote.
The think tank attributed the gap to the relatively low cost of investment goods in China, which it estimated at about 37 per cent of US levels. On that basis, it calculated an investment purchasing power parity of 2.6 yuan per US dollar – stronger than market rates and widely used estimates.
“As China’s economy recovers and transitions from the old to the new economy, rising prices are expected to bring the yuan’s valuation closer to its fundamentals, supporting its emergence as a strong currency,” the note’s authors wrote.
Source: News - South China Morning Post
