China’s Overtaking of the US: Uncertain Timelines

When China Will Overtake Us?

There’s no denying that China’s economy is growing faster than America’s. But the question of when it will overtake us remains unanswered.

Some experts are now predicting that it will take until 2033 before China overtakes the United States. But others are urging caution. How the COVID-19 pandemic and other factors play out will be crucial.

1. China will overtake us in the next decade.

Until recently, China watchers were gung-ho about the country eventually overtaking America as the world’s biggest economy. The New York Times endorsed the prediction in 2021, while Goldman Sachs raised the date from the early 2040s to the late 2020s.

Now, however, that prediction may never happen. Observers are increasingly worried that the day of reckoning may be delayed by slow economic growth in China, and even a complete loss of momentum in its economy.

For a start, the population that drives the country’s economic growth is aging and peaking. This will mean lower productivity and slower growth as the economy matures. In addition, the onset of COVID-19 has hobbled Chinese manufacturers and damaged exports. It is possible that, without a major boost from importing top-notch technology from advanced economies, the country’s current talent and technology base may not be enough to close the gap. Ultimately, this could mean that China never surpasses the US in nominal GDP.

2. China will overtake us in the next 20 years.

The sharp slowdown in China’s economy over the past year has prompted many experts to reconsider when its GDP will eclipse America’s—or whether it ever will. One common view is that China’s rise has passed its peak, and that it will soon wane as its working-age population shrinks, labour productivity growth slows, and prices and the exchange rate fluctuate.

The exact date depends on three factors: China’s demographics, its price and labour-productivity trends, and the US’s nominal GDP growth and renminbi appreciation. On the fastest path, China’s economy will overtake America’s in the middle of the 2030s.

But if China’s population peaks later than Goldman Sachs expects, and labour productivity sags even half as much (as Capital Economics thinks it will) then the country will never overtake the US. The question is what China’s leadership will do about this. It could realise that its brief period of relative economic dominance may have passed its sell-by date and choose a more cooperative approach to the global economy.

3. China will overtake us in the next 30 years.

Few analysts believe that China will overtake the United States as the world’s largest economy any time soon. For one thing, the country’s economic model is shifting to rely more on state investment and high-tech development than on export manufacturing. And that means China’s growth is likely to slow down or even stop completely as it moves away from its traditional strengths.

China also has a rapidly aging population, which will reduce the number of working-age people and put stress on government services. In addition, the country is short of water and tillable, fertile soil, which limits its ability to grow food.

Despite these challenges, the Chinese economy is still growing rapidly. Citi Research forecasts that China’s GDP will overtake the United States’ in nominal terms by 2028. But if it wants to consistently overtake the United States, it will have to sustain its current rate of growth for decades. That’s a tall order, especially given all the risks in the global economy and trade disputes with the United States.

4. China will overtake us in the next 40 years.

In nominal terms, China will likely overtake the US sometime in this century. But in PPP terms, it’s not going to happen anytime soon.

That’s because the growth of China is slowing down and its population has peaked. As a result, its economy will not grow fast enough to overtake the US any time soon.

China’s current economic model — with its significant focus on investment, property and exports – is not sustainable. The good news is that there are other models out there.

For example, if China were to shift to a services-based economy, it could become the world’s largest by 2040. But it would require an enormous amount of reform. It is not yet clear whether China’s leadership is up to the task. And even if it is, the transition would be disruptive for production, jobs, markets, investments, household and government budgets, and global supply chains. As the New York Times columnist Paul Krugman recently pointed out, such a shift might turn out to be like Japan’s in the 1990s, when worries about an Asian country’s world domination proved wildly unfounded.

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