The Chinese economy is set to overtake the U.S. faster than previously anticipated after weathering the coronavirus pandemic better than the West, according to the Centre for Economics and Business Research.
The world’s biggest and second-biggest economies are on course to trade places in dollar terms in 2028, five years earlier than expected a year ago, it said on Saturday.
China looked set for average economic growth of 5.7% a year from 2021-25 before slowing to 4.5% a year from 2026-30.
While the United States was likely to have a strong post-pandemic rebound in 2021, its growth would slow to 1.9% a year between 2022 and 2024, and then to 1.6% after that.
Japan would remain the world’s third-biggest economy, in dollar terms, until the early 2030s when it would be overtaken by India, pushing Germany down from fourth to fifth.
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 single market, British GDP in dollars was forecast to be 23% higher than France’s by 2035, helped by Britain’s lead in the increasingly important digital economy.
Europe accounted for 19% of output in the top 10 global economies in 2020 but that will fall to 12% 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.”
In its World Economic League Table, the consultancy also calculated that China could become a high-income economy as soon as 2023. Further cementing Asia’s growing might, India is set to move up the rankings to become the No. 3 economy at the end of the decade.
Chinese President Xi Jinping said last month it was “entirely possible” for his economy to double in size by 2035 under his government’s new Five-Year Plan, which aims to achieve “modern socialism” in 15 years.
China was the first economy to suffer a pandemic blow, but has recovered swiftly, according to government data. That should prompt Western economies to pay much more attention to what is happening in Asia, according to the report.
“Typically, we compare ourselves with other Western economies and miss out on what often is best practice, especially in the rapidly growing economies in Asia,” it said.
