China may be smaller than we thought. The Chinese economy is not a $10 trillion economy about to pass the United States, but a $6 trillion economy - 40 percent smaller than previously calculated. India's economy is 40 percent smaller, too. The figures are from a World Bank statistical report of the economic output of 146 countries. What does this mean?

For one thing, it means that lots of people disagree with the World Bank's figures and the methodology behind them. The International Monetary Fund has different figures. So do other agencies, financial institutions and international organizations. The disagreeing experts may confuse, not clarify, the situation.

The media have never attracted editors and reporters who have a firm grounding in economics and statistics. Therefore, the mainstream media are not prepared to analyze and report this news. So the media, especially in the U.S., have neglected the report and its possible ramifications. Those politicians who claim to understand the significance of the report have jumped into the debate and used the figures to support various projects and positions that they favor.

The old figures predicted that China would pass the U.S. and become the world's largest economy in 2012. The new figures put the Chinese economy at about half the size of the U.S. economy. If the World Bank is correct, China will not challenge the U.S. for global economic leadership for decades and perhaps even centuries. Economic leadership in the past has translated into political leadership.

Will China lack funds?

Other important implications flow from the report: If the World Bank is correct, China will have less money to spend on its infrastructure and military, and the Chinese will face much deeper social and economic problems at home than previously assumed. China will have to go slower in curtailing pollution and cleaning up the environment. Of concern to importers of Chinese goods, China will not have the funds to convert all the industries that have produced toxic or tainted products.

So what happened to that $4 trillion in Chinese gross domestic product? That is where the disagreement comes in. The economists at the World Bank calculate a country's gross domestic product by adding up the prices of the goods and services its economy produces. Each country's GDP is stated in the local currency - dollars for the United States and yuan for China. But to make comparisons, the economists convert each country's GDP into U.S. dollars. The easiest way to make the conversion is to use prevailing exchange rates.

For 2006, the World Bank calculated that China produced 21 trillion yuan in goods and services. Using the exchange rate of 7.8 yuan to the dollar, the Bank figured that China had a GDP of $2.7 trillion. Because China artificially manipulates the value of its currency, the Bank figured that $2.7 trillion was too low.

The economists know that goods and services tend to cost less in developing countries such as China. To adjust for that, the economists compare prices from one economy to another and compute an adjusted GDP based on the principle of "purchasing-power-parity." Each country's GDP is adjusted to get a more realistic measure of relative economic strength. Each country's actual living standard is analyzed. This is where economics moves from science to art, from mathematics to appraisal and forecasting.