International Comparison of China's Price Level: Gaps and Its Influence Factors

The World Bank recently published China's Purchasing Power Parities (PPPs) based on the survey data of China participating in 2011 round of the International Comparison Program (ICP). China's PPP is 3.506 RMB per USD and Price Level Index is 70% of the world average. This paper first analyzes the international gaps of the China's price level, studies on the influence factors, and finally discusses the limitations of the ICP data, method and results. Research shows that China's price level is low compared with main countries in the world but under the influence of multiple factors, the price level in China is on the rise and the international gap has narrowed. From a long-term point of view, the price level in China withstands the pressure rise. It is suggested that the inflation expectation be controlled and the exchange rate of RMB be stabilized to ensure that the rise in the price level does not go beyond the normal range of economic development level of China.