World Energy Outlook 2007

averaging growth in real gross domestic product of 9.8% per year since 1980
and India 5.9%. The world as a whole grew by only 2.8% per year over the
same period. India saw growth of 9.7% in 2006, up from 9% in 2005, while
China’s growth reached 11.1% in 2006, up from 10.4% in 2005.
No other large country has grown as fast as China since 1980. Such a high rate
of growth is not unprecedented – double-digit rates have been recorded in
some countries over other periods – but no large country has sustained such a
rate for such a long period (Figure 3.1). The rate of expansion of China’s share
of the world economy has been much larger than that of any other country yet
recorded, jumping from barely 1% in 1980 to over 5% in 2006. India’s
economic take-off is more recent, as growth began to accelerate in the 1990s,
and is now approaching that of China. GDP growth in India has averaged 7%
per year since 2000, compared with 5.7% per year in the 1980s and 1990s.
More detail about China’s and India’s economic development can be found in
Chapters 7 and 14.
3
Box 3.1: Measuring and Comparing Gross Domestic Product
For energy-modelling purposes, the gross domestic product of different
countries is converted into constant US dollars using purchasing power
parities (PPPs) rather than market exchange rates. PPPs compare the costs
in different currencies of a fixed, wide-ranging basket of goods and services,
including items that are traded and not traded on international markets.
Adjusting GDP for PPP provides a more reliable measure of the physical
economy, including the amount of infrastructure and industrial activity,
and standards of living. This is a better explanatory variable for energy
demand than simple measures of income. It also aids comparisons of energy
intensity and energy-use patterns among countries. However, the use of
PPPs is not without problems, one being that people and business consume
different baskets of goods and services in different countries. For assessing
the impact of economic developments in one country on another, actual
market exchange rates provide a better basis. This is because international
effects result from the international exchange of goods, services and assets
– the prices of which tend not to vary much across countries.
There are some similarities and some important differences between the
characteristics of economic development in China and India. China has followed
a similar development path to that of other East Asian countries, involving the
recycling of export revenues and domestic savings into fixed investment. China
is often characterised as the world’s workshop, with growth driven largely by
Chapter 3 - International Trade and the World Economy 137