By 2030, China is forecast to become the world’s largest economy, for now, it has just surpassed the EU.
In a milestone moment, the economy of China surpassed the whole of the European Union (EU), for the first time.
Figures released this week by the European Statistical Office (Eurostat) said that the gross domestic product (GDP) of the EU grew by 5.2 percent for 2021, following a record-breaking recession in 2020.
The EU wide GDP stood at just over $17 trillion, regaining its pre-Covid-19 size.
The GDP is a measure of the market value of all the final goods and services produced in a specific time period.
On the other hand, China’s GDP for 2021 expanded by 8.1 percent, according to figures released last month by the county’s National Bureau of Statistics. The full-year GDP resulted in China’s economy increasing in value by $3 trillion from 2020 to 17.7 trillion in 2021, leaping ahead of the EU.
The world’s second-largest economy benefited significantly during the Covid-19 crisis from its status as the world’s factory. However, most of the economic gains for China were driven by strong industrial output and exports.
China, however, has largely followed a zero Covid-19 policy, which has meant that the country has often locked down entire cities in a bid to prevent the spread of the virus.
The result has been that while the country’s manufacturing sector continues to power ahead, the growth in services, consumption and investment all failed to return to pre-pandemic levels owing to localised outbreaks around the country which prevented a return to normality.
China’s GDP growth rate easily surpassed the government’s target of above six percent growth, and the country is now expected to account for more than 18 percent of global GDP.
While the country has bounced back from the worst of the pandemic, analysts warn that the country is still reeling from a weak real estate sector that has seen companies go bust in the last year.
Similarly, the EU has yet to recover fully from the tight restrictions from the Omicron variant, which led to tighter restrictions across the economic bloc, resulting in lower consumer spending and supply chain bottlenecks, impacting manufacturing.
China’s ability to overtake the bloc was also influenced in part by the withdrawal of the UK from the EU following Brexit. The UK’s GDP of $2.7 trillion was the second largest in the bloc after Germany.
Beijing still has some way to go before it can become the largest economy on the planet.
In a report last month, the British consultancy the Centre for Economics and Business Research (CEBR) forecasted that China is expected to overtake the US as the world’s largest economy by 2030.
In 2021 the US GDP stood at just under $23 trillion, a $2.10 trillion increase over the 2020 figures.
The CEBR report forecasted that the US economy will continue to grow without any of the necessary spurts in growth to maintain its lead. It also added that China’s massive pool of engineers would be a significant driver of growth in contrast to the US, which cannot churn out the same level of highly skilled labour.