Here’s How Fast China’s Economy Is Catching Up to the U.S.
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China appears set to eclipse the U.S. to become the world's biggest economy within the decade as it powers out of its coronavirus slump. The IMF forecasts China's economy will slow to a mere 1.0% this year and then surge 8.2% in 2021. In the U.S., where more than 120,000 people have died from the virus, the economy will contract 8.0% in 2020 before a more muted 4.5% acceleration in 2021, according to the latest IMF forecasts. Applying those projections and penciling in growth rates somewhere around pre-Covid-19 averages thereafter sees China overtaking the U.S. in 2029.
China’s GDP will overtake the U.S. level in at these projected average growth rates:China’s GDP will remain under the U.S. level by 2040 at these target growth rates:
Most Chinese people are still much poorer than the average American
Even on a purchasing-power parity basis that adjusts for price differences, the average person in China still has way less spending power than an American.
Figures are in purchasing power parity, 2011 international dollars.
China is already the world’s largest trading nation
China’s exporting prowess has fueled massive trade surpluses and tensions with the U.S. Its competitive advantage in many products is now so entrenched for both local and foreign firms that even the ongoing trade war has failed to dent it. Meantime, its swelling ranks of middle class consumers mean many companies can switch to targeting sales toward them as tariffs increase.
China has about the same proportion of city dwellers as the U.S. did in 1940
Some of China’s biggest economic drivers over the past 40 years remain intact today. One such tailwind is the huge wealth and spending created as people move from the countryside to cities—a process that still has decades to run. That’ll fuel demand for jobs, apartments and services, beefing up the purchasing power of another 300 million to 400 million people.