FlyTitle: The Big Mac index

How big is China’s economy? Let the Big Mac decide


AMERICA’S ECONOMY did not exceed China’s in size until the 1880s, according to the Maddison Project at the University of Groningen. The two now rival each other again. Because China’s workers are 4.7 times as numerous as America’s, they need be only a fraction as productive to surpass America’s output. No fewer than 53 countries would already have a bigger GDP than America if they were as populous as China.

美国的经济规模直到19世纪80年代才超过中国——格罗宁根大学的麦迪森项目(Maddison Project)显示。现在两国又开始一较高下了。由于中国的劳动力数量是美国的4.7倍,人均生产力只需要达到美国的几分之一便可在整体产出上超过美国。如果其他国家也有中国如此庞大的人口,那么至少会有53个国家的GDP高于美国。

In 2019 China’s workers produced over 99trn yuan-worth of goods and services. America’s produced $21.4trn-worth. Since it took about 6.9 yuan to buy a dollar last year, China’s GDP was worth only $14trn when converted into dollars at market rates. That was still well short of America’s.


But 6.9 yuan stretches further in China than a dollar goes in America. One example is the McDonald’s Big Mac. It costs about 21.70 yuan in China and $5.71 in America, according to prices collected by The Economist. By that measure, it takes only 3.8 yuan to buy as much as a dollar. But if that is the case, then 99trn yuan can buy as much as $26trn, and China’s economy is already considerably bigger than America’s.

但是, 在中国的6.9元人民币比在美国的1美元更耐花。麦当劳的巨无霸汉堡就是一例。根据本刊收集的价格,一个巨无霸在中国的售价约为21.70元,在美国约为5.71美元。照此计算,只要3.8元人民币就能达到1美元的购买力。但如此一来,99万亿元人民币的购买力便相当于26万亿美元,那么中国的经济规模已经明显超过了美国。

Motivated by this logic, The Economist has compared the price of Big Macs around the world since 1986. The result is a rough gauge of the purchasing power of currencies. It suggests that many currencies are undervalued, relative to the dollar, on the foreign-exchange markets (see chart). The Swiss franc and the Lebanese pound are overvalued. Lebanon’s currency was undervalued until inflation took off late last year, raising local prices even as the pound remained pegged to the dollar. The Big Mac alone jumped 38% in price.


经济学人双语版-肉饼劲道 Patty power

Every few years the World Bank embarks on a vastly more systematic effort to gauge purchasing power by comparing thousands of prices across the world. The results can be startling. Its survey of prices in 2011, released six years ago, showed that China was cheaper than previously thought and its economy was therefore much larger. Based on these estimates, the IMF calculated that its GDP overtook America’s in 2014 and was 27% bigger in 2019.


Many observers, however, greeted these estimates with scepticism. In 2010 an informal survey by a reporter at Caixin, a financial magazine, noted that a number of items were dearer in Hangzhou than in its sister city Boston. (It compared apples to apples, and found that the Golden Delicious variety was 37% pricier in the Chinese city.)


The sceptics won some vindication in May when the World Bank released its latest price-comparison exercise. It discovered that things were about 17% more expensive in China, relative to America, than previously thought. At a stroke, China’s GDP fell by over $3.2trn. The estimates suggest China did not overtake America’s economy until 2016.


But are these new estimates any more robust than earlier efforts? Comparing prices across the world is fraught with difficulties. An item may be a staple in one place and a delicacy in another. The World Bank must also decide how much weight to give each item. That depends on shopping habits, which differ—partly because prices differ. It is easy to go around in circles.


So it might help to check the World Bank’s results against a cruder yardstick—like the price of a Big Mac. Our index suggests that the bank now, if anything, underestimates the buying power of China’s currency, and therefore its economic size. McDonald’s was once a symbol of America’s economic might. Now the Big Mac shows how its might is being surpassed. ■