It was written in heaven. China would knock the United States off its pedestal and become the world’s largest economy, it was only a matter of time. Now it seems like it’s not so obvious anymore.
In 2010, many experts believed that China would become the world’s largest economy… in 2020. More recently, a study by Goldman Sachs argued that the American economy, which sits at the top of the countries with the highest gross national product, would be overtaken by that of China around 2035.
It won’t happen before 2060, if it ever does, a Rockefeller Center researcher recently argued in the Financial Times.
One might wonder what the point is in knowing who will be the next “top gun” of the global economy, but it’s a question that many would like to know the answer to.
The question is also of importance for the international financial system dominated by the king dollar, which could lose its influence if China becomes the world’s largest economy.
The United States has topped this ranking since the 1920s, but below them the list has changed significantly over the years. Japan, the world’s second largest economy at the end of the 1960s, was overtaken by China in 2010. The United Kingdom has just been overtaken by India, its former colony, in fifth place on the list. Italy has dropped a lot in the rankings.
Economic hegemony depends a lot – but not only – on demography for obvious reasons. The more a country has a population, the more needs it will have of all kinds to satisfy and the more the total production of goods and services, which is measured annually by the gross domestic product (GDP), will increase.
Not so long ago, the outlook was pretty clear: with an economic growth rate of around 10%, China would quite quickly swallow up the ranks that separated it from the United States, whose GDP was growing half as fast. India, the country on the way to becoming the most populous in the world, which was the 15th largest economy in the world in 1990, has climbed to 5th place and is expected to continue its rise, according to most projections.
On the contrary, China’s progress is somewhat slowed by a combination of factors. Demographically first. It’s hard to believe for a country that has banned its citizens from having more than one child to limit its population growth, but China’s population is no longer increasing and could start to decrease in the next decade.
Trade realignment is another hurdle that could hamper China on its way to the top of the world.
It is just beginning. Chinese technology is no longer welcome anywhere, and more and more countries are banding together to stop selling China any of their most technologically advanced tools.
With the energy transition, the United States, Canada and Europe hope to repatriate some of their manufacturing capacity and reverse the flow of trade that has benefited China so much for 40 years. Despite all the billions that will be invested to achieve this, it would be surprising if China could be eliminated from the equation.
The impact of this realignment of trading blocs on global economic growth remains to be assessed.
Meanwhile, China and India continue to move faster than other countries towards the top position. This year, as the United States teeters on the brink of recession, economic growth is expected to be 5.9% in India and 5.2% in China, according to revised forecasts from the Organization for Cooperation and Development economic.
