Cebr’s last World Economic League Table (WELT) published in December 2022 suggested that China leapfrogging the US to become the world’s largest economy measured in dollar terms might be delayed to 2036 from the 2028 date previously forecast.
The next version of WELT to be published this coming December will update this forecast but we will almost certainly still expect that this particular version of ‘il sorpasso’ will take place, despite China’s fairly sluggish opening up from Covid and unfavourable demographics. China’s population is still more than four times that of the US and even taking into account an increasingly dirigiste economic policy, it seems most unlikely that China will fail to achieve sufficient economic growth to get its GDP per capita up to a quarter of the US level.
In a sense, being the world’s largest economy in dollar terms means little. China became the largest in purchasing power terms as long ago as 2017, based on IMF data[1], and there are no cups or gold medals for achieving first place. But the level of dollar GDP does give an indication of a country’s economic and potential military power, and of its international significance.
And what is particularly interesting for China is what will happen after it reaches number one. Projecting forward from the data in the December 2022 Cebr World Economic League Table, it is quite possible that China may only hold the number one slot for the relatively short period of just over 20 years.
After that its adverse demographics seem likely to allow the US to recover the top position. And looking even further ahead, India is likely to overtake both at some point after 2080.
Projections this far ahead are based on a host of assumptions. Perhaps the least uncertain (though even these estimates have huge margins of error) are the demographic estimates. Our numbers use the UN population projections for the US and for India.[2] For China, though, the UN projections seem to have overstated the scale of population growth and we have used those by the Shanghai Academy of Social Science.[3]
The huge demographic changes that are predicted are spectacular. China’s population, which has stabilised this year at just over 1.4 billion, is forecast to fall gradually to 1.2 billion in the mid-2050s but then much more dramatically to 590 million by 2100. India’s, which some predict will overtake the Chinese population as early as this year, is expected to peak just under 1.7 billion in 2063 but fall back to 1.5 billion by 2100. That of the US is expected to keep growing from today’s 334 million to 433 million in 2100.
Much less certain is predicted GDP per capita growth. For this set of predictions, we have assumed that US real GDP per capita keeps growing at its recent rate of 1% per annum; China’s gradually slows from over 4% at present to 2% and India’s slows from 5% to 3%. Clearly small and perfectly plausible changes in any of these assumptions will affect the results substantially.
But if they are right, some important conclusions emerge. First, China’s GDP never gets much bigger than that of the US and eventually falls back behind. By 2100 the US’s GDP is 45% bigger than China’s. Second, India emerges as the third and eventually the biggest economic superpower, with GDP by 2100 90% larger than China’s and 30% larger than that of the US.
Perhaps the most important conclusion is that China’s time at the top is likely to be very limited in duration and by the end of the current century it is likely to be at best only one of three superpowers and possibly the junior partner amongst the three.
Obviously, the Chinese government must suspect this. How do they react? A case can be made for either of two very different responses. One might be to realise that any period on top is temporary and that China needs to adopt a cooperative approach to dealing with other economies. But the other might be to take advantage of what might be only a small period of considerable relative power and to use that window to achieve national objectives such as taking over Taiwan and establishing dominance in some regions and technologies.
Which of these approaches they take will have huge consequences not just for China but also for the rest of the world.
[1] IMF World Economic Outlook April 2023
[2] UN World Population Prospects 2022
[3] Data from Shanghai Academy of Social Science, accessed via Real Clear Science.
For more information, please contact:
Douglas McWilliams, Deputy Chairman
Email: dmcwilliams@cebr.com, Phone: 07710 083652
Cebr is an independent London-based economic consultancy specialising in economic impact assessment, macroeconomic forecasting and thought leadership. For more information on this report, or if you are interested in commissioning research with Cebr, please contact us using our enquiries page.