China rejects third place in IMF league of economies

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The Independent Online
SOME countries are naturally rich, some achieve great wealth - but now there is one that would rather not have economic superpower status thrust upon it.

China yesterday firmly rejected an International Monetary Fund calculation that put its economy as the third largest in the world.

'The report of the IMF has overestimated the economic output of China,' a Foreign Ministry spokesman said crisply. China remained a developing country, he said, and with 1.1 billion people still had a long way to go to catch up even with 'medium-developed countries'.

Not normally a country known for underplaying its achievements, China's reticence stems from the fear that any significant upgrading of the size of its economy might jeopardise its qualifications for cheap loans and special grants available to the world's poorest countries.

It could also exacerbate tensions with the Western world over the size of China's trade imbalance, particularly at a time when Most Favoured Nation trading status and possible membership of the General Agreement on Tariffs and Trade are both up in the air.

The IMF's alternative ranking for China is based on a different way of doing the sums. Under the traditional method, a country's economic output is converted into US dollars at market exchange rates. On this measure, China comes out as the tenth largest economy.

The new system considers the comparative purchasing power of the different currencies to try to establish a more realistic ranking. Suddenly, China's economy leaps to third, just behind the US and Japan.

One thing the IMF and Peking would agree on is that China's economy is surging ahead at a relentless pace. Last year's 12.8 per cent growth was surpassed in the first quarter of this year. More worryingly, there are now widespread signs of over-heating, with the most recent figures showing inflation at 17 per cent in the big cities.

The re-ranking also offers some comfort to China, a country notorious for providing unreliable statistics - even the IMF cannot always decide which way to do its sums.