If I make $80,000 and my cup of coffee costs $4, and the person in China makes $4,000 but their equivalent cup of coffee costs $0.10 - they'd have you believe that person has a meaningful purchasing power advantage.
Right up until that person earning $4,000 tries to buy a BMW, take a vacation to Paris, or save more than $400 per year.
The last five years of China's growth has been entirely fake. Their return on invested capital has plunged, and it now takes an extreme amount of debt to generate each dollar of GDP growth. Their economy stopped growing normally with the end of the global consumer boom in 2009. They've spent the years since accumulating one of the greatest piles of debt in world history. Within two to three years, they'll be the most indebted nation, with their total debt to GDP ratio already exceeding that of the US.
It now takes $4 to $5 trillion in new debt per year, just to stay near their 6%-7% GDP growth target. Put another way, they have to take on $7+ of new debt for every $1 of GDP growth.
Their PMI, electricity usage, imports, exports, and real estate market are all signaling imminent disaster. Up next their record-shattering stock market bubble is going to go bust, causing trillions of dollars in damage.
The next 20 years are going to be extraordinarily painful for China. They're making the same mistakes Japan did, except they're doing it at warp speed, and with a billion very poor people to deal with.
General government gross debt [Percent of GDP]
Country Year 2012 2013 2014 2015
China 26 23 20 19
United States 102 104 106 107
Currency exchanges are meaningless when you're talking about quality of life and purchasing power, and PPP is meaningless when you're talking about total production.
On the other hand, you did the remarkable feat of using an example of when PPP is being used CORRECTLY (comparing purchasing power and quality of life per person) to argue against using it.
[Edit] Besides the PPP issue, I agree with the rest of your post, China is desperately looking for a way out of the demographic and political trap it dug itself into.
"$40K in savings with an average life is highly preferable to $3K in savings with an average life."
Your comparison is meaningless, unless they are in the same country with the same cost of living.
"You could very quickly find $3k/year of savings obliterated if that $1K goes to $4K. It's a lot harder for a $40K cost of living to go to $60K or $80K."
Again, meaningless, unless they are in the same country with the same cost of living.
That's what PPP is for.
http://www.wsj.com/articles/americas-online-sales-opportunit...
We have been thinking that our first international expansion should be to China, rather than other traditional English speaking nations.
https://en.m.wikipedia.org/wiki/Economy_of_China#/media/File...
By one measure (PPP) China has already passed the U.S.
http://www.bbc.com/news/magazine-30483762