This year is the first year after the epidemic. The global economy is in a cold state. The 11 rounds of interest rate hikes in the United States, the 10 rounds of interest rate hikes by the European Central Bank and the continuation of the Russia-Ukraine conflict have led to a slowdown in global demand. Basically, the exports of major industrial countries in the world have experienced a significant decline. The economy is shrinking, and advanced export oriented countries such as Japan and South Korea continue to have trade deficits. Japan even experienced a trade deficit for 22 consecutive months.
Due to inconsistent economic cycles among major economies, exchange rate fluctuations are significant. In order to curb inflation, the United States and the European Union have started to raise interest rates significantly. The price deflator in China has even shown negative values, and further economic vitality needs to be unleashed. Japan has been facing long-term deflation, so it has not raised interest rates. Therefore, the overall appreciation of the US dollar and euro has led to the depreciation of the Chinese yuan and Japanese yen.
This has also led to a decrease in GDP in US dollars for China and Japan. This is also a drawback of calculating GDP through exchange rates, distorting the actual economic output of each country. If we look at purchasing power parity, it may more intuitively reflect the overall economic situation of each country.
In the first half of this year, the US GDP grew by 2.2% year-on-year. This is already a very good growth rate for a highly developed country like the United States with a per capita GDP exceeding 70000 US dollars. Combined with the ongoing inflation in the United States, the US GDP reached $13.35 trillion in the first half of this year. Due to the fact that the US dollar is the local currency of the United States, the purchasing power of the US GDP is also $13.35 trillion.
Since China surpassed the EU in 2021, the EU has become the world's third largest economy. In the first half of this year, the EU's GDP grew by only 0.4%. This is of course due to the global economic stagnation and the impact of the Russia-Ukraine conflict.
The EU sanctions against Russia after the Russia-Ukraine conflict have seriously damaged Russia's energy trade and deprived the EU of stable and cheap energy supply. This not only increases production costs, but also exacerbates concerns about future uncertainty, leading to EU production and capital flight. Last year alone, Germany's outflow of funds exceeded 120 billion euros.
In the first half of this year, high inflation in the European Union drove up nominal GDP. In addition, the 10 rounds of interest rate hikes by the European Central Bank have also pushed up the euro exchange rate. In the first half of this year, the EU's GDP was 8.22 trillion euros, equivalent to $8.88 trillion.
Let's measure the purchasing power GDP of the European Union based on last year's purchasing power parity level. In 2022, the EU's GDP was 15.81 trillion euros, with a GDP purchasing power of 22.81 trillion US dollars. The ratio is approximately 1.443. Recalculating, the EU's GDP in the first half of this year was approximately $12.81 trillion, which is not much different from the United States.
So what about our country? In the first half of this year, China's GDP increased by 5.5% year-on-year, reaching 59.3 trillion yuan. Due to the very low price deflator in the first half of this year, compared to the GDP of 56.26 trillion yuan in the first half of 2022, the nominal GDP is 5.4%, which also means that the price deflator is -0.1%. China's actual GDP is much higher than that of the United States and the European Union, but its nominal GDP is lower than that of the United States and the European Union. With the depreciation of the exchange rate, China's GDP in US dollars has decreased compared to last year.
However, the purchasing power of GDP is not affected by exchange rates. In 2022, China's GDP was 121.02 trillion yuan, and its purchasing power GDP was 30.33 trillion US dollars, with a ratio of 3.99. According to calculations, China's GDP in the first half of this year was 14.86 trillion US dollars. Approximately 113.31%, compared to 116% in the European Union.