Market Realist – Per capita GDP in China is galloping away.
The graph above shows the per capita GDP (gross domestic product) of China. Per capita GDP is the total GDP of an economy, divided by its population. The number is a national average. The per capita GDP in China (FXI) has grown by 129% in the last ten years.
The per capita GDP is useful for comparing one economy to another, because it shows the relative performance of countries. Unlike the GDP, which shows just the total amount, per capita GDP shows the same, adjusted by the number of citizens.
A rise in per capita GDP usually signals growth in the economy. It could also be construed as an increase in productivity. As well, it’s a measure of the standard of living. The higher the number, the higher the standard of living.
The per capita GDP of China increases every year, even when adjusted for inflation. Still, it’s much lower than the per capita GDP of developed markets (EFA) like Japan (EWJ), Europe (EZU), and the US (SPY), where the numbers are all well over $30,000. Meanwhile, China could catch up within a few decades, if it continues to grow at this rate.
But let’s assume China grows at around 7%, unlike the higher growth rates it’s seen in the recent past. If its population grows by 1.4%, then the 50-year average, per capita GDP growth will be much lower than in the past.
In the next part of this series, you’ll find out why China has become a market leader in car production.