China has now surged five years ahead of its previously predicted pace to overtake the U.S. as the world’s largest economy, according to a new report by the U.K.-based thinktank Centre for Economics and Business Research (CEBR), published Saturday.
At its current pace, China will now become the world’s largest economy by 2028, according to CEBR’s 2021 World Economic League Table (WELT) report. CEBR largely attributed the Covid-19 pandemic for affecting the paces of economic growth for the U.S. and China.
“For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China,” the report states. “The COVID-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China’s favour.”
The CEBR report said, China’s “skillful management of the pandemic” through strict and early lockdown measures, along with damage to long-term economic growth in western countries allowed China to move ahead of the relative economic growth pace CEBR predicted for China last year.
“The big news in this forecast is the speed of growth of the Chinese economy. We expect it to become an upper-income economy during the current five-year plan period (2020-25),” CEBR deputy chairman Douglas McWilliams said in comments reported by the Guardian. “And we expect it to overtake the US a full five years earlier than we did a year ago.”
The CEBR report said China quickly recovered from the economic impacts of Covid-19, and the economic think-tank predicted China will show a two percent economic growth rate in 2020, as the only major global economy to grow this year. CEBR projected the U.S. economy to contract by five percent for the same time period.
“Other Asian economies are also shooting up the league table,” McWilliams said. “One lesson for western policymakers, who have performed relatively badly during the pandemic, is that they need to pay much more attention to what is happening in Asia rather than simply looking at each other.”
China’s overall economic output has rapidly increased in the past 20 years. In 2000, China accounted for 3.6% of the global gross domestic product (GDP). In 2019, China produced 17.8% of the global GDP. CEBR predicts China will continue along a course of 5.7% economic growth every year from 2021 to 2025 and then 4.5% a year from 2026 to 2030.
Despite its overall growth, the living standards in China are still expected to remain much lower than those in the U.S. and western European countries. In the U.S. the current average per capita income is just over $63,000, while China is expected to pass the per capita threshold of $12,536 to become a high-income country by 2023.