New GDP figures at purchasing power parity (PPP) seem to suggest that China may have already overtaken the U.S. as the world's largest economy, the Times of India said in a report on Friday.

A report by NPR on Friday explains how China's $5.7-trillion economy has seemingly overtaken the U.S. economy:

By traditional measures of gross domestic product — the value, in U.S. dollars, of total goods and services produced — the size of the U.S. economy is $14.6 trillion. China's GDP is only $5.7 trillion. But if China's economy is assessed according to its purchasing power, it may be a different story.

The Times of India points out that market exchange rates have traditionally formed the basis for comparison of GDP across countries, but this method has come under criticism as it does not take into account the differential costs of goods and services in countries at different levels of development.

It says a different system, the Penn World Tables, adopted by the Center for International Comparisons at the University of Pennsylvania (CICUP), is regarded by some economists as a better system of comparing GDPs.

Arvind Subramanian, senior fellow at the Petersen Institute for International Economics, used the Penn revision to correct various anomalies in GDP comparison and found that China's GDP has overtaken that of the U.S.

The adjustments increase China's GDP from the current estimate of $10.1 trillion to $14.8 trillion (an increase of 47%, of which 27% is due to the revision in the 2005 estimate, and the rest due to smaller-than-assumed increases in the cost of living between 2005 and 2010). This $14.8 trillion figure exceeds US GDP of $14.6 trillion, Subramanian said.

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