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The World's Largest Economy

According to the International Monetary Fund (IMF) October 2010 World Economic Outlook [WEO] data projection, China's purchasing power parity [PPP] share of world total would surpass that of the USA by 2016-2017. The IMF forecast used GDP figures based on purchasing power parity, rather than current exchange rates. The April 2011 IMF forecast was that the Chinese economy would surpass that of the United States by 2016. According to the April 2011 forecast, China's GDP will become $18.975 trillion by 2016, moving from the present $11.174 trillion, whereas the American economy will rise to become $18.8 trillion from $15.2 trillion. "After growing by 10 percent in 2010, China's growth is expected to remain robust at 9 percent this year and next, with the drivers of growth shifting increasingly from public to private demand. Consumption will be buttressed by rapid credit growth, supportive labor market conditions, and continued policy efforts to raise household disposable income."

Other calculations point to a transition, except not until 2030. Goldman Sachs forecast China's GDP overtaking that of the US by 2025 at the earliest. Some analysts have predicted that it could happen even sooner, if indeed it has not already happened. Arvind Subramanian, a senior fellow at the Peterson Institute and the author of a book on China's economic dominance, states "that the Chinese economy in 2010, adjusted for purchasing power, was worth about $14.8 trillion, surpassing that of the United States." According to the International Monetary Fund, total US gross domestic product in 2010 was $14.7 trillion, more than twice China's $5.8 trillion at current exchange rates.

A report published by the UK-based Center for Economics and Business Research on 26 December 2020 forecast that China will overtake the US to be the world's largest economy in 2028. It believed the COVID-19 pandemic and related issues led to a situation favorable to China during the process of China-US competition. The Japan Center for Economic Research also made similar predictions on 10 December 2020. Whether the trajectory of GDP growth of China and the US will evolve as British and Japanese think tanks predict remains to be seen. A few years ago, HSBC predicted that China's GDP could surpass that of the US in as early as 2025. But with China's economic growth slowing down, people's expectations changed.

To achieve more balanced, sustained Chinese growth, China must continue to reform its development strategy away from export and investment-led growth. Chinese authorities have stated that they recognize the need to address the imbalances in the domestic economy and have made "rebalancing" growth a key feature of China's 11th Five-Year Plan. In its second quarter report the PBOC noted, "while the protracted contraction of external demand will extend into the medium- and long-term period, the fundamental way to achieve sound and relatively rapid economic development is to accelerate reform and restructuring programs, with a priority on boosting consumption and domestic demand." While some progress has been made, household consumption growth remained near or below the growth rate of GDP.



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Page last modified: 01-08-2021 14:07:41 ZULU