[thomasz]

PPP is meant to account for things like a haircut in San Francisco creating way more economic output than a haircut in rural China, and therefore inflating the numbers. It doesn’t completely solve the problem of comparing the economic output of a 747 to the economic output of a haircut in rural China.

If you are used to the lifestyle of the western upper middle class and consume the associated products, the effects of the PPP adjustment will not be that meaningful to you. The same isn’t true for people who have to use most of their income to buy basic necessities like shelter, food, transportation and so forth.

[seanmcdirmid]

Average Chinese costs are lower, however, not because their PPP is higher, they just have lower LCOL. So that hair cut that is only 20 kuai is done by a guy outside in the alley who maintains one very long finger nail (and yes, I actually experienced that before). If we were to compare the average Chinese bought car with the average American bought car, you would see a similar effect.