China is set to surpass the United States to become the world’s largest economy in 2028, five years earlier than previously expected because of the contrasting recoveries of the two nations from the COVID-19 pandemic, a think tank said.
“For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China,” the Centre for Economics and Business Research said in an annual report published recently.
“The COVID-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China’s favor.” The CEBR said China’s “skillful management of the pandemic”, with its strict early lockdown, and hits to long-term growth in the West meant China’s relative economic performance had improved.
Until slowing to 4.5 percent a year from 2026-30, China is headed for average economic growth of 5.7 percent a year from 2021-25.
Although the United States is projected to have a strong post-pandemic recovery in 2021, between 2022 and 2024, its growth will slow to 1.9 percent a year, and then to 1.6 percent after that.
Other global economies
Japan would remain, in dollar terms, the third largest economy in the world until the early 2030s, when India would surpass it, pushing Germany from fourth to fifth position. The United Kingdom, currently the fifth-biggest economy by the CEBR’s measure, would slip to sixth place from 2024.
However, despite a hit in 2021 from its exit from the European Union’s (EU) single market, British GDP (Gross Domestic Product) in dollars was forecast to be 23 percent higher than France’s by 2035, helped by Britain’s lead in the increasingly important digital economy.
Europe accounted for 19 percent of output in the top 10 global economies in 2020 but that will fall to 12 percent by 2035, or lower if there is an acrimonious split between the EU and Britain, the CEBR said.
It also said the pandemic’s impact on the global economy was likely to show up in higher inflation, not slower growth.
“We see an economic cycle with rising interest rates in the mid-2020s,” it said, posing a challenge for governments which have borrowed massively to fund their response to the COVID-19 crisis. “But the underlying trends that have been accelerated by this point to a greener and more tech-based world as we move into the 2030s,” the report said.