China Tops U.S. as Biggest Economy by Purchasing Power

China overtook the U.S. last year as the world’s biggest economy when measured in terms of purchasing power, according to Arvind Subramanian, senior fellow at the Peterson Institute for International Economics in Washington.

The size of China’s economy in 2010 was $14.8 trillion, compared with the U.S.’s $14.6 trillion, when accounting for the countries’ differing costs of living, Subramanian wrote in a note published yesterday, a week before President Hu Jintao visits Washington. So-called purchasing power parity calculates gross domestic product using exchange rates that adjusts for price differences of the same goods between nations.