China will overtake the US to become the world’s largest economy by 2028, five years earlier than previously forecasted, a report by CEBR which releases its economic league table on 26 December of every year says.
The UK-based Centre for Economics and Business Research (CEBR) said China’s “skillful” management of Covid-19 would boost its relative growth compared to the US and Europe in coming years.
“For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China,” says the CEBR report.
“The Covid-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China’s favour.” Meanwhile India is tipped to become the third largest economy by 2030.
Although China was the first country hit by Covid-19, it controlled the disease through swift and extremely strict action, meaning it did not need to repeat economically paralysing lockdowns as European countries have done.
As a result, unlike other major economies, it has avoided an economic recession in 2020 and is in fact estimated to see growth of 2% this year.
The US economy, by contrast, has been hit hard by the world’s worst coronavirus epidemic in terms of sheer numbers. More than 330,000 people have died in the US and there have been some 18.5 million confirmed cases.
The economic damage has been cushioned by monetary policy and a huge fiscal stimulus, but political disagreements over a new stimulus package could leave around 14 million Americans without unemployment benefit payments in the new year.
The report says that after “a strong post-pandemic rebound in 2021”, the US economy will grow by about 1.9% annually from 2022-24 and then slow to 1.6% in the years after that.
But by contrast, the Chinese economy is tipped to grow by 5.7% annually until 2025, and 4.5% annually from 2026-2030.
China’s share of the world economy has risen from just 3.6% in 2000 to 17.8% now and the country will become a “high-income economy” by 2023, the report says.
But the average Chinese person will remain far poorer in financial terms than the average American even after China becomes the world’s biggest economy, given that China’s population is four times bigger.