China will overtake the US as the world’s biggest economy before the end of the decade after outperforming its rival during the global Covid-19 pandemic, according to a report.
The Centre for Economics and Business Research said that it nowexpected the value of China’s economy when measured in dollars to exceed that of the US by 2028, half a decade sooner than it expected a year ago.
In its annual league table of the growth prospects of 193 countries, the UK-based consultancy group said China had bounced back quickly from the effects of Covid-19 and would grow by 2% in 2020, as the one major global economy to expand.
With the US expected to contract by 5% this year, China will narrow the gap with its biggest rival, the CEBR said. Overall, global gross domestic product is forecast to decline by 4.4% this year, in the biggest one-year fall since the second world war.
Douglas McWilliams, the CEBR’s deputy chairman, said: “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). And we expect it to overtake the US a full five years earlier than we did a year ago.
“Other Asian economies are also shooting up the league table. 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 share of global GDP has increased from 3.6% in 2000 to 17.8% in 2019 and will continue to grow, the CEBR said. It would pass the per capita threshold of $12,536 (£9,215) to become a high-income country by 2023.
Even so, living standards in China will remain much lower than in the US and western European countries. In the US, the average per capita income is just over $63,000, while in the UK it is just over $39,000.
The CEBR said departure from the EU would not prevent the UK – likely to be the world’s fifth biggest economy in 2020 – from being one of the better performing economies in the next 15 years.
“We expect the trend rate of growth for the UK to be 4.0% annually from 2021-25 and 1.8% annually from 2026-30 and 1.8% annually from 2031-35,” the consultancy said.
“The UK is forecast to be overtaken by India in 2024 but otherwise holds its place in the league table to 2025. By 2035, UK GDP in dollars is forecast to be 40% more than that of France, its long-standing rival and neighbour.”
India, after overtaking France and the UK last year, had fallen back behind the UK as a result of a sharp fall in the value of the rupee. But the dip will be short-lived, with the world’s second most populous country on course to be its third biggest economy by 2035.
The CEBR said environmental issues would start to have a serious impact on the shape of the world economy over the next 15 years following a period in which the effects of global heating had become apparent more quickly than previously feared.
“Sea levels are expected to have risen by 45cm from the 2000 base by 2035. This compares with the smaller 20cm rise by 2030 predicted two years ago.”
With more countries making plans to make the transition to net carbon zero economy in the coming decades, the CEBR said there would be weaker demand for fossil fuels and lower oil prices. The cost of a barrel of crude would fall below $30 by 2035, it said.