<p>WHAT’S the most powerful country in the world? There’s a good case to be made that it’s China. There are many kinds of power – diplomatic, cultural, military and economic. So an easier question to ask is: What’s the world’s largest economy? Almost certainly China. Many might protest. After all, the US still produces the most when measured at market exchange rates. But this comparison is misleading, because things cost different amounts in different countries. Gross domestic product (GDP) is supposed to measure the amount of real stuff – cars, phones, financial services, back massages, etc – that a country produces. If the same phone costs $400 in the US but only $200 in China, China’s GDP is getting undercounted by 50pc when we measure at market exchange rates. In general, less developed countries have lower prices, which means their GDP gets systematically undercounted.</p>