China is a Developing Country

The trading status of China has always been a contentious point of dispute between China and the USA and I have always wanted to explore this argument. This post attempts to clarify why China is still a developing nation.

The Facts Presented

The status of China as a developed or developing country is always the focused of trade negotiation between trading nations especially where China is involved. This issue is important in the context as to how China is to be treated within the World Trade Organisation (WTO). China has always maintained her argument that she is a developing country and should be treated as such however her trading partners sees otherwise.

To make matter worst the WTO agreement is written in such a way that countries can declare whether they are a developed or a developing country themselves. WTO does not have a definition for developed or developing status.

Why the country’s declared status is important.

Under the rules of the WTO there are advantages to being declared as a developing country. Under the WTO:

Developing country status in the WTO brings certain rights. There are for example provisions in some WTO Agreements which provide developing countries with longer transition periods before they are required to fully implement the agreement and developing countries can receive technical assistance.

For more details go here.

However, this does not mean that preferential treatment is automatically conferred to the declared country. It is still subject to the agreement of the counter party in the trade discussion.

Gross Domestic Product (GDP)

The GDP is the measure of the size of the economy and hence the prosperity of the country. Let us explore the GDP of these two economies more closely.

The USA has a GDP of approximately $18,773 billion and China a GDP of approximately $11,243 billion in 2016 making them the two largest economies in the world with the USA being the largest. As a comparison the nearest is Japan with a GDP of only $4,730 Billion.

If measured by the purchasing power parity (PPP) China would surpass the USA and be the largest economy, however for this article we will only consider the GDP.

You may be thinking “why is China considered a developing country and not a developed country with such a large economy” – it sounds nonsensical for China to call it-self a developing country. But there is a logic to this and we have to drill down deeper and explore the numbers to find the answer.

GDP per capita for China as a Whole

A simple measure of the prosperity of the country would be to determine the GDP per capita of each country. To determine that we will need to know the GDP of each country and its’ population size.

China has a population size of approximately 1.3 billion people whereas the population size of the USA is approximately 308 million people. Therefore the simple calculation is as follow:

GDP per capita = Gross Domestic Product (GDP) / Population
China – $11,243 billion / 1.3 billion = $8,648 GDP per capita
USA – $18,773 billion / 0.309 billion = $60,754 GDP per capita

Even though China have a large economy its’ GDP per capita is 6.6 times smaller than of the USA. On the world ranking of GDP per capita size China is only ranked No. 70 out of 186 countries in the world in 2016 whereas the USA is ranked in 7th place with the number one spot going to tiny Luxemburg with a GDP per capita of $103,199. Clearly China has a long way to go before it can truly declare it-self a developed country.

The GDP per capita based on the GDP of the country and the total population also does not give the full picture of the GDP per capita of the various regions across China. These varies from a high of $20,140 to a low of $4,074 (Beijing excluded).

A breakdown of GDP per capita for Municipalities, Provinces and Autonomous Region in China

To explore further, China consists of 4 Municipalities, 22 Provinces, 5 Autonomous Regions and 2 Special Administration Regions. For the purpose of this article the 2 Special Administrative regions (Hong Kong and Macao) are not included. I have tabulate the Municipalities, Provinces and Autonomous Regions with their corresponding GDP, population and calculated GDP per capita in descending order as below:

And to easily visualize the results of my analysis the results are presented in bar chart format as below:

Being the seat of power in the China, the chart excludes Beijing which have an in-ordinate concentration of wealth.

To summarise:
Guangdong has the highest GDP of $1158 billion and a population of 104,303,132 people.
Tibet has the lowest GDP of $17 billion and a population of 3,002,166 people.
Whilst Tianjin is the Province with the highest GDP per capita of $20,140.
However, Gansu has the lowest GDP per capita of $4,074 of all Municipalities, Provinces and Autonomous Regions

A breakdown of GDP Per Capita in the USA.

I have carried out a similar analysis for 50 States + District of Columbia (excluding Guam, U.S. Virgin Islands, American Samoa and the Northern Mariana Islands). The table below lists the states and corresponding GDP, population and calculated GDP per capita in descending order with the State with the largest GDP being first.

Similarly the bar charts below provides a visual representation of the tabulated data.

Being the seat of power in the USA, the chart excludes DC which have an in-ordinate concentration of wealth.

To summarise:
California has the highest GDP of $2,656 billion with a population of 37,254,503 people.
Vermont has the lowest GDP of $31 billion with a population of 625,745 people.
Whilst North Dakota is the State with the highest GDP per capita of $85,345.
However, Mississipi has the lowest GDP per capita of $36,459 in the USA.

We can already see from this analysis that Mississipi with a GDP per capita of $36,459 in the USA is already higher than Tianjin in China with a GDP per capita of $20,140.

In Conclusion

The range of GDP per capita across China ranges from $4074 to $20,140 with the highest GDP per capita located in eastern parts China. These being the coastal provinces which is also the location of the manufacturing power centers of the world.

An average GDP per capita of $8,648 is only achieved because of the strength of these coastal provinces. In many parts of China the GDP per capita is still very low and the average value does not truly reflect this. In my view if Beijing, Shanghai, Tianjin and maybe Jiangsu were taken out of the calculation the GDP per capita of China would be much lower. Indeed a majority of these provinces if considered as country would rank well below 70th position in the world.

China has always been accused of inflating its’ GDP numbers, if true, then the real GDP per capita is even lower than imagined. China may be the second largest economy in the world but her people are still very poor in comparison.

Therefore, China is right to declare it-self a developing country.

I wrote this article myself and it expresses my own opinions. The data used to write this post have been sources from chinainternetwatch.com and Wikipedia. Apart from the opening graphic, all the tables and charts were prepared by me.

---

Use this code UxW31v @genesis-mining to get a 3% discount on your purchase.

---

If you found this post informative then VOTE, COMMENT, FOLLOW and RESTEEM.

Live Long and Prosper