China in elite $10,000 per capita GDP club

The Chinese economy grew at 6.1% in 2019, its lowest GDP growth in 29 years. Yet, China’s importance in the global economy cannot be overemphasised.

China’s per capita gross domestic product (GDP) crossed $10,000 for the first time in 2019 and it could become a high-income economy by 2023 or 2024.

The Chinese economy grew at 6.1% in 2019, its lowest GDP growth in 29 years. Yet, China’s importance in the global economy cannot be overemphasised. The Chinese economy accounts for almost 30% of the global GDP growth today. Both in terms of per capita GDP and global contribution to growth, China is now far ahead of India, although the gap has been plateauing in the recent years. (See chart 1: Ratio of China and India per capita GDP and GDP).

 

China’s per capita GDP reached $10,276 in 2019, according to data released by the National Bureau of Statistics. This is the first time China’s per capita GDP has crossed the $10,000 level. The 2018 per capita GDP figure was $9,771, which gives a simple annual growth of 5.2% between 2018 and 2019. A back of the envelope calculation shows that if this growth rate continues, China could become a high income economy – per capita Gross National Income of $12,376 or more – by 2023-24. So, by the time India becomes a $5 trillion economy, China could become a high income country.

The achievement has come in a year when the world’s second largest economy grew at 6.1%, the lowest in 29 years. China’s GDP numbers were released a day after US and China, the top two economies in the world, agreed to a trade deal, putting an end to 18 months of trade war including tariff and non-tariff measures.

To be sure, the $10,000 per capita GDP barrier does not have a lot of significance. According to the World Bank classification for fiscal year 2020, low-income economies are defined as those with a Gross National Income (GNI) per capita of $1,025 or less in 2018; lower middle-income economies are those with a GNI per capita between $1,026 and $3,995; upper middle-income economies are those with a GNI per capita between $3,996 and $12,375; high-income economies are those with a GNI per capita of $12,376 or more. So, China will continue to be in the upper-middle income country classification.

Of the 218 countries for which income group data was available, according to a June 2019 World Bank classification, 80 countries were in the high-income category, while 60, 47 and 31 countries were in the upper-middle income, lower-middle income and low income category. South Asia, which also includes India, is the only region which does not have a high-income country. India is in the lower-middle income category with a per capita GNI of $2,079 in 2018.

While China crossing the $10,000 per capita GDP barrier might not sound like a big development in the descriptive stats on income-wise distribution of countries discussed above, it’s a significant development given the size of the Chinese economy. Between 2010 and 2018, the latest period for which GDP data is available in the World Development Indicators database of the World Bank, China accounted for 29% of the total increase in world GDP in constant US dollars. This is 10 percentage points more than US’s share in incremental global GDP during this period. For India, the number is 7.5%. China’s share in world GDP in 2018 was 13%. (See Chart 2: Share in incremental global GDP)

 

China’s GDP growth will not come back to its earlier double digit levels, but as the first billion plus people economy to cross $10,000 per capita income level, its importance in the global economy will only increase in the future.