US versus China — their economic strength
It is customary to use the nominal dollar GDP figure to measure the economic strength of a nation, and the per capita GDP to assess the relative prosperity of individuals. The current nominal dollar GDP ranking for the top six nations is in the order USA, China, Germany, India, Japan, and UK, with figures of 30.5, 19.2, 4.7, 4.2, 4.2, and 3.8 trillion dollars (IMF 2025 figures).
However, these figures are not quite trustworthy since some countries are more expensive to live in than others, and the official exchange rates between currencies are a product of geopolitical power equations and national trade policy. The US dollar, which has served as the international reserve currency due to historical reasons, is overvalued. Despite annual budget deficit of $2 trillion, the American dollar is strong.
The US is paying for goods imported from all over the world with paper money, and clearly this cannot go on forever. It has created inflation, increased disparity between social classes, and led to huge asset bubbles.
The overvaluation of the dollar is a double-edged sword. It leads to a higher standard of living but also makes manufacturing uncompetitive. Countries with high per capita GDP are attractive destinations for migrants even if the underlying strength of the economy is poor in the long run. For a nation that is living off debt an economic crash may be round the corner.
When comparing GDPs between countries, differences in the cost of living may be adjusted with purchasing power parity (PPP) that equalizes key elements of the economy. GDP per capita measured in PPP dollars helps compare living standards between nations.
The 2025 IMF figures for GDP in PPP have this ranking: China, USA, India, Russia, Japan, and Germany with figures of 40.7, 30.5, 17.6, 7.2, 6.7, and 6.2 trillion PPP dollars, respectively.
The PPP comparison seems more reasonable than the nominal dollar ranking given Russia, a powerful military power is at the 4th position, whereas in nominal dollar GDP it is at an implausible 11th position.
US and China
Since US and China are in the top two ranks in both the nominal dollar and the PPP measures, let’s compare them to get a better sense of the numbers. In nominal dollars, US is 1.5 times stronger, but in PPP dollars China is 1.3 times stronger.
The nominal dollar comparison does not reveal the fact that China is significantly more affordable than the USA, with daily costs roughly 30–50% lower. China’s street food and local dining options are far cheaper, its house prices and rentals are lower, and its high-speed rail and cheap public transit make domestic travel more affordable than the USA’s reliance on flights or car rentals. According to one AI platform, a week-long trip for a budget traveler will cost $259–$350 in China versus $833–$1,050 in the USA.
What about salaries? Let’s compare the salaries in the academia for they can be taken to be representative of salaries in other fields. Professors at top-tier U.S. universities earn significantly higher nominal salaries ($175,000–$250,000, and this can go up to millions) than those in China ($42,000–$70,000 at Tsinghua/Peking). Although China’s lower cost of living and benefits like housing subsidies make salaries more competitive when adjusted for PPP, they are comparatively much lower. The USA offers greater earning potential for star professors in high-demand fields, but its high living costs and stagnant real wages (0.9% growth) reduce real income. China’s steep hierarchy and merit-based system favor top performers, but overall salaries remain significantly lower.
American experts complain that China can manufacture more cheaply due to the state provided subsidies and lower energy and labor costs (as in the figures above). While this may be true, another way of looking at these figures is to acknowledge that China is more efficient and the factors that contribute to it are a more industrious workforce without the burden of DEI quotas.
President Trump has argued that his economic policies with instruments such as tariffs are meant to drive the dollar down — or the yuan up — so that manufacturing in the US becomes competitive. But it is not clear how that would be achieved.
Tariffs could force many factories to close shop in China, but reopening these factories in the US with much more expensive labor will only drive the prices up that will make these products more expensive for the American consumer and the products will not be able to compete with the Chinese in other markets. Manufacturing is a zero-sum game, and the only option for the US is to help relocate production to other less expensive countries. If that’s done, it will lead to a major realignment of geopolitical equations.
To see how the economic contest between the US and China might unfold, it is imperative to see where they stand now.
A reasonable ranking system
A better measure of economic strength, superior to both nominal dollar and PPP comparisons, is one where we average the two. The nominal dollar GDP is a measure of economic power based on currency strength and economic activity, whereas PPP is a measure that also tracks the population size which is clearly important for it represents future demand. The average is a fairer representation of global economic power than either the nominal dollar or PPP estimates.
If the two are averaged out, the top ten economic powers that emerge are:
Although the US figure is slightly above that of China, they are nearly identical and, therefore, US and China should be considered jointly at number 1.
