Sunday, December 20, 2020

PPP and the Shanghai Girl

After PPP correction the PRC economy is significantly larger than the US economy, so it's important to understand what nominal GDP and its adjusted counterpart represent. 

This 2019 video follows a 26 year woman around during a typical weekend day. She lives in a $330 per month apartment in central Shanghai, a short walk to her office where she works as an advertising copywriter. You get a look at the apps she uses to order food and household supplies, keep up with fashion and culinary trends, pay at restaurants, etc.

Her monthly budget is about $2300 USD per month, and as far as I can tell her lifestyle would cost more than twice as much in NYC (e.g., Brooklyn), San Francisco, Chicago, or even a somewhat smaller US city. So the nominal to PPP correction of 2x may actually be conservative! Some have suggested that the PRC government deliberately understates its GDP in order to continue to claim "developing nation" status, and to not alarm US hawks (as if that were possible).

In late 2010 I was in Shanghai for a physics meeting, and blogged about dollar-yuan purchasing power parity (PPP).
Shanghai: PPP on the ground  
1 USD = 6.64 RMB. Average salary in Shanghai is reportedly 65k RMB or about USD $10k per annum. ... The IMF estimates that the PPP (purchasing power parity) vs nominal exchange rate adjustment for China is about a factor of 2 (i.e., PPP GDP is about twice nominal GDP). That doesn't sound entirely crazy to me but it's very dependent on choice of goods for the PPP basket. ... 
Haircut 10 RMB = $1.50. (My barber in Eugene = $11.) 
Dinner on campus 9 RMB = $1.35. 

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