World Bank says China and India are 40% smaller

According to a preliminary estimate by World Bank, economies of the two highest growing countries, China and India, are over estimated by about 40%. This estimate is based on purchasing power parity (PPP).

The Chinese economy's new estimate is 5.3 trillion dollar where as it was valued at 8.8 trillion dollars earlier. China is still the second largest economy of the world second only to US and ahead of Japan, Germany and India. China's share of World's GDP is estimated to be 9% which was earlier estimated to be 14%. Japan with 7% of World's GDP is third largest economy.

US contribution to World's GDP has dropped to 23% from 29% using exchange rate data. Still its far ahead of the second largest economy, China.

India's GDP estimate has been reduced from 6% to 4% of World's GDP. Earlier India was ranked fourth, now it has come to fifth with small gap with UK and France. World's economy was also overestimated. Together top five countries comprise of more than half of World's GDP.

The new ranking by World Bank is based on prices of 1000 goods and services. World Bank said that the earlier estimates were less reliable and for the first time China has participated in the World Bank’s International Comparison Program and India has done so first time after 1985.

This is the first major global comparison of this kind using data based on PPP. World Bank President Robert Zoellick, in Beijing, warned that even the new estimate is not totally correct and only reflects prices in the cities. He also said that this should not be used to measure poverty levels. "One has to be extremely careful about trying to draw judgements about poverty based on these statistics," said Zoellick. World Bank said, "These results are more statistically reliable estimates,... ...It was the most extensive and thorough effort ever to measure PPPs across countries." "We're working with the Chinese government to refine that work and as I think that will be out some time next year," he said.

China's bank reserve ratio may increase

According to a report by ICBC (The Industrial and Commercial Bank of China) the reserve ratio required for commercial banks can reach 15% in 2008. Currently the ratio is 13.5%, which is a ten year high. More monetary tightening is expected to follow in order to curb the inflation and deal with rising Yuan. The ratio requirement has been increase nine time in this year and has crossed the previous highs of 13% observed during mid 1998. The reserve ratio hike will suck about $25 billion from the money market and reduce the surplus liquidity.

A good analysis on the tightening measures taken by Chinese central bank and its repercussions is done Lu Jianxin and is available with Reuters.

PetroChina crosses $1 Trillion mark

PetroChina created history by becoming the first company in world to cross trillion dollar mark in market capitalization. PetroChina's share were listed today in Shanghai stock exchange after it came up with an IPO last month. PetroChina's shares on listing today were trading at triple the initial public offer price. At these prices the valuations certainly look expensive but considering the kind of bull run that Chinese stock market is undergoing the stock can have some upside from these level also. The relative valuation of the Chinese Oil & Gas major can be compared by the fact that the second largest company by market capitalization, Exxon Mobil Corp., is only half of the PetroChina's current market cap when PetroChina is not even in world's top 50 companies by earnings. PetroChina's valuation can only be explained by the future outlook of the company and kind of growth Chinese economy is witnessing.

PetroChina is all set to surpass Exxon Mobil in market capitalization

The biggest listed Chinese company, PetroChina, has recently overtook General Electric to become the world's second-biggest company by market capitalisation, next only to Exxon Mobil Corp. Now, PetroChina is ready to beat Exxon Mobil Corp. This has been eased by the recent IPO which PetroChina came up with for the domestic investors. Presently, it is listed in HongKong and US. After its listing on November 5, its market capitalization is expected to be more than 800 billion USD. Exxon has a market cap of $ 485 billion and PetroChina's combined market cap in the US and Hongkong is about $450 billion.

Earlier PetroChina raised $9 billion in the biggest IPO of the China overtaking the record set by China Shenhua Energy when it raised $8.8 billion from investors last month. PetroCina's IPO is the biggest of this year.

China crosses US in top 10 market capitalization

Five Chinese companies are now in global top ten companies by market capitalization. Chinese stocks have almost tripled in past ten months of year 2007. It is currently trading at P/E ratio of more than 50. PetroChina, which recently has raised $9 billion in the world's biggest initial public offer (ipo) , is all set to become the world leader in market capitalization after it opens for trading in secondary market. Currently PetroChina is ranked second only to Exxon Mobil Corp.

The top 10 companies in world by market capitalization are:

Rank	Company	Country	Approx. Market Cap ($)
1	Exxon Mobil Corp.	US	485
2	PetroChina	China	450
3	General Electric Co.	US	411
4	China Mobile	China	393
5	ICBC*	China	330
6	Microsoft Corp.	US	327
7	Gazprom	Russia	290
8	Royal Dutch Shell	Netherlands	277
9	Sinopec**	China	276
10	China Life Insurance	China	260

*ICBC - Industrial and Commercial Bank of China.
**Sinopec is also known as China Petroleum and Chemical Corporation

Market Capitalization of India and China

India’s stock market index, Sensex, has doubled in two years; China's stock market's index Shanghai Stock Exchange (SSE) has nearly tripled in last 10 months (since the beginning of this year).

P/E ratio of Indian stocks averages 25 while that of China is about 50.

China’s market capitalization $3.5 trillion is more than double of India’s $ 1.6 trillion.

China has five companies in the world’s top 10 companies by market capitalization while Indian companies are yet to enter the list. India’s biggest company by market capitalization, Reliance Industries Limited has recently crossed the $100b mark.

Industrial and Commercial Bank of China (ICBC) has replaced Citigroup from the top position in the banking sector. Three of the world’s top six banks are from China. These are ICBC, China Construction Bank and Bank of China. Chinese companies are now the world’s leader by market capitalizations in banking (ICBC), insurance (China Life Insurance), telecoms (China Mobile) and airlines (Air China).

Similar kind of trend was seen in 20^th century when US companies replaced European companies in the list of world’s top companies by market capitalization.