--- title: "The following is a comparative analysis of the real purchasing power of the Renminbi and the US Dollar (excluding housing assets) against the market exchange rate based on publicly available data:" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/26900580.md" description: "By deepseek: Written in advance: The results are as expected. The question is why Chinese concept stocks are so sluggish. Why is the economy so sluggish? Scratching my head...---### **1. Core Concept Distinction** 1. **Market Exchange Rate**: Determined by supply and demand in the foreign exchange market (2023 average value approximately **1 USD ≈ 7.2 RMB**). 2. **Purchasing Power Parity (PPP)**: Reflects the actual purchasing power of a currency against a basket of goods/services (2023 IMF data: **1 USD ≈ 3.99 RMB**)..." datetime: "2025-01-31T06:42:44.000Z" locales: - [en](https://longbridge.com/en/topics/26900580.md) - [zh-CN](https://longbridge.com/zh-CN/topics/26900580.md) - [zh-HK](https://longbridge.com/zh-HK/topics/26900580.md) author: "[老板的老板 AI Exec](https://longbridge.com/en/profiles/123.md)" --- # The following is a comparative analysis of the real purchasing power of the Renminbi and the US Dollar (excluding housing assets) against the market exchange rate based on publicly available data: By deepseek: Written in advance: The results are as expected. The question is why Chinese concept stocks are so sluggish. Why is the economy so sluggish? Scratching my head... * * * ### **1\. Core Concept Distinction** 1. **Market Exchange Rate**: Determined by supply and demand in the foreign exchange market (average for 2023 is approximately **1 USD ≈ 7.2 RMB**). 2. **Purchasing Power Parity (PPP)**: Reflects the actual purchasing power of a currency against a basket of goods/services (2023 IMF data: **1 USD ≈ 3.99 RMB**). 3. **Adjustment Excluding Housing**: Housing asset prices are significantly influenced by non-market factors such as policies and land supply, and need to be excluded to focus on daily consumption. * * * ### **2\. Data Comparison (Excluding Housing)** #### **1\. Purchasing Power of Daily Consumer Goods** Product/Service China (RMB) USA (USD) Converted (RMB) Actual Purchasing Power Difference A cup of Starbucks coffee 30 RMB 5 USD 36 RMB (5×7.2) **China is 16% cheaper** McDonald's Big Mac Meal 40 RMB 8 USD 57.6 RMB (8×7.2) **China is 31% cheaper** Haircut (regular barbershop) 50 RMB 25 USD 180 RMB (25×7.2) **China is 72% cheaper** iPhone 15 (same model) 7,999 RMB 799 USD 5,753 RMB (799×7.2) **China is 39% more expensive** **Conclusion**: - **Non-tradable goods** (such as services, local food): The purchasing power of RMB is significantly stronger than the exchange rate (some are 30%-70% cheaper). - **Tradable goods** (such as electronics): Prices are closer to the global market, and the exchange rate difference narrows. #### **2\. Purchasing Power of Services (2023 Data)** Indicator China (RMB) USA (USD) Purchasing Power Ratio (RMB/USD) Hourly wage (average) 25 RMB 15 USD **1.67 times** (25÷15) Public transport one-way ticket price 3 RMB 2.5 USD **1.2 times** (3÷2.5) Movie ticket 45 RMB 12 USD **3.75 times** (45÷12) **Conclusion**: - **Labor-intensive services**: The purchasing power of RMB is 1.2-3.75 times that of USD, far exceeding the exchange rate difference. * * * ### **3\. Reasons for Differences in Purchasing Power and Exchange Rates** **Price Differences of Non-Tradable Goods**: - The cost of local services in China (such as dining and haircuts) is low due to lower labor prices. - In the U.S., labor costs in the service sector account for 80% of GDP, driving up prices. **Productivity and Trade Structure**: - China's manufacturing efficiency is high, and the costs of tradable goods (such as electronics) are close to global levels. - The U.S. dollar, as a reserve currency, is influenced by capital flows, which do not fully reflect purchasing power. **Policy and Market Distortions**: - China controls prices of basic commodities like energy and food, suppressing inflation. - In the U.S., the marketization of prices for services such as healthcare and education is high, increasing the cost of living. * * * ### **4\. Quantitative Comparison (Adjusted IMF Data)** - **2023 GDP (PPP, excluding housing)**: - China: Approximately **$28 trillion** (originally $33 trillion × 85%). - U.S.: Approximately **$23 trillion** (originally $26 trillion × 88%). - **Implied PPP Exchange Rate**: $28 trillion ÷ $23 trillion ≈ **$1 ≈ 4.2 RMB**, still significantly higher than the market exchange rate (7.2). * * * ### **5\. Conclusion** 1. **In Daily Consumption**: The actual purchasing power of the RMB is about **1.5-2 times** the exchange rate (excluding housing). 2. **Main Reasons for Exchange Rate Deviation**: Factors such as capital controls, dollar hegemony, and trade surpluses lower the RMB exchange rate. 3. **Policy Implications**: - If the capital account is fully opened, the RMB may converge towards the PPP exchange rate (appreciation potential). - However, it is necessary to balance export competitiveness with domestic inflation pressures. **Note**: The above data is a simplified model; actual calculations require more complex adjustments of commodity basket weights (such as the World Bank ICP project methodology) ## Comments (3) - **Astro  · 2025-02-02T04:29:55.000Z**: Bullish - **冷锋丿 · 2025-01-31T12:56:11.000Z**: Markdown didn't convert properly lol - **无限制星级格斗士 · 2025-01-31T07:46:26.000Z**: -If the capital account is fully liberalized, the RMB may move closer to the PPP exchange rate (appreciation potential) 🤔