Moody's Investors Service says that the latest estimates from the International Comparison Program (ICP) hosted by World Bank expect China to be the largest economy in the world by end-2014, which highlights the emerging market's rising economic importance.
"While it had been expected that China's GDP would surpass US GDP in the medium term, new estimates -- compiled by the World Bank's ICP -- indicate that China's emergence as the world's biggest economy will take place by the end of this year, five years sooner than most economists had previously expected," says Lúcio Vinhas de Souza, a Moody's Managing Director and Sovereign Chief Economist.
"Based on purchasing power parity (PPP), the new estimates suggest that China's GDP will reach $17.9 trillion by end-2014, compared to $17.5 trillion for the US," says Vinhas de Souza.
This is in contrast to the IMF's calculations on GDP using current price levels and market exchange rates, which puts US GDP in 2014 at $17.5 trillion and China's at $10.0 trillion.
"PPP exchange rates provide a more representative way to compare the relative size of economiesthan volatile market exchange rates, as price levels, especially for non-tradable goods and services, are normally higher in high-income economies," says Vinhas de Souza.
Market exchange rates are also influenced by factors such as currency speculation, interest rates, government intervention, and capital flows between economies.
The new data -- ICP 2011, which was released in April 2014 -- also shows that China, India, Russia, Brazil, Indonesia, Saudi Arabia and Turkey, which are classified as middle income economies, accounted for 31.6% of global GDP in 2011, and is an increase of 9.0 percent from the 22.6% in 2005.
"The ascending rankings of these emerging economies highlight their rising economic importance," says Vinhas de Souza.The report also states that the share of global GDP for the other 13 largest economies, classified as high-income economies, decreased to 44.9% from 56.3% over the same period.