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February 04, 2011

China's economy US$7.5 trillion including underground economy at the end of 2010

China ended 2010 with $6.1 trillion GDP regular exchange economy.

China has more underground economy than the US. The underground economy is estimated to add about 9.3 trillion yuan or another 25%.

This is USD7.5 trillion at the end of 2010.

China should have 8-10% GDP growth in 2011, 5% inflation and 4-10% currency appreciation. The bottom of the range for 2011 is 8.8 trillion and the top is 9.52 trillion based on the ranges I described for growth, inflation and currency and the inclusion of the underground economy.



Financial risk and the urban underclass

The UK Telegraph writes about problems with China's economy and the property bubble and risks for a financial crisis

In Beijing's vast network of unused air defence bunkers, as many as a million people live in small, windowless rooms that rent for $45 to $76 a month, which is as much as many of the city's army of migrant laborers can afford. The small ones [6ft by 9ft] are 300 yuan [$45] the big ones [15ft by 6ft] are 500 yuan [$76].

Urban and GDP Growth
A census going on now in China and data will start to be released in about April/May should have a better set of numbers.

A lot of the GDP growth is from the urbanization. People in the cities are 3 times richer than the rural people. By moving 1-2% of the population to the cities each year, over a few years they are fully absorbed into the urban economy. This provides an extra 3-6% boost to the GDP growth. It is a series of people get moved up over time to urban levels.

China is creating the next level of urbanization with integration of many cities with five levels of infrastructure The one city effect from this integration provides an extra 1-2% per year of GDP growth for that region and seems to result in an extra 20% in overall GDP enhancement over 10-20 years.

China is also integrating cities in the south.

On a purchasing power parity (PPP) basis (new Penn World 7.0 statistics) China has a bigger economy than the US as of 2010. The PPP numbers suggest that China's currency is about 40-50% undervalued relative to the US dollar.

China is shifting to promote the domestic economy over exports.

China is less dependent on exports than most people think (per the Economist magazine)

China's Projected GDP by NBF without underground economy:

Year GDP(yuan) GDP growth USD/CNY China GDP China+HK US GDP  US Growth 

2010N 39.5         10.5    6.59       6.1      6.3   14.6   2    
2011 44             9.6    6.2        7.2       7.4   14.9   3.5
2012 49             8.5    5.9        8.5       8.7   15.2   4.2
2013 55             8.5    5.6        9.8      10.1   15.5   4.2
2014 60             8.5    5.3       11.4      11.7   15.7   2.7
2015 66             8.5    5.0       13.2      13.5   16     2.7
2016 73             8      4.8       15.3      15.6   16.4   2.7 
2017 80             8      4.6       17.6      17.9   16.8   2.7 Past USA
2018 87             8      4.3       20        20     17.2   3
2019 95             8      4.1       23        23     17.6   3
2020 104            7.5    3.9       27        27     18.1   3
2021 113            7.5    3.7       30        31     18.7   3
2022 122            7.5    3.5       35        35     19.2   3
2023 133            7      3.4       40        40     19.8   3
2024 143            7      3.2       45        45     20.4   3
2025 154            7      3.0       51        51     21.0   3
2026 166            7      3         55        56     21.6   3
2027 178            7      3         59        60     22.3   3
2028 192            7      3         64        64     23.0   3
2029 206            7      3         69        69     23.6   3 
2030 222            7      3         74        74     24.4   3

Including the underground economy, China would be passing the US economy in 2015.

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