China could overtake the US in terms of nominal GDP by 2034

China could overtake the US in terms of nominal GDP as early as 2034, according to the Focus Economics forecast until 2050. The current trajectory of GDP dynamics suggests a gradual slowdown in China’s growth to comparable with the US, but experts warn of significant risks to this forecast. In India and Indonesia, on the contrary, higher growth rates will be maintained, which, as experts suggest, will allow these countries to reach the third and fourth places in terms of GDP in the world.

China’s economy will outpace America’s in terms of nominal GDP by 2034 and will remain the largest by 2050, according to the Focus Economics consensus forecast through 2050. At the same time, China’s growth rate will continue to decline – from the current “about 5%” to less than 2%, the growth of the American economy will also slow down, but much more slowly – from 2% to 1.5%. As a result, the growth rates of both countries will be comparable.

At the end of 2022, the American economy was 42% larger than the Chinese one (taking into account the nominal volume of GDP and the market exchange rate), by 2034 China’s GDP could reach $41 trillion, while the US GDP will be $40 trillion. By 2050, this gap will grow to 20% (China’s GDP could be $84 trillion). China can increase productivity, as well as the level of urbanization, but an aging population, as well as restrictions on technological development, will be a significant constraint on growth, Focus Economics notes. This applies to both tighter regulation within the country and restrictions on foreign trade. Strengthening these trends could prevent China from ever catching up with the US in terms of GDP. For the US economy, the key risk remains the polarization of the political system, which can harm institutions. The escalation of the conflict around Taiwan may also have pronounced consequences for both sides, the authors of the forecast add.

India will remain the largest economy with a growing population by the middle of the century: by 2050 it will become the third in terms of GDP, which nominally can grow to $38 trillion. This is three times the size of Indonesia’s next largest economy (see graph). India can position itself between China and the Western economies, with a young population that will close the gap with China. If now the Indian economy is one-fifth of the Chinese economy, then by 2050 it will grow to half. At the same time, GDP per capita even by 2050 in China will be three times higher than in India. A weak (relative to other Asian countries) education system and trade protectionism can slow down the growth of the Indian economy – India refrains from liberalizing its own trade and participating in large trade blocs in the Asia-Pacific region, such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement on the Trans-Pacific Partnership (CPTPP).

In addition to China, the USA, India and Indonesia, Germany, Japan, Great Britain, Russia, France and Canada will also remain in the top ten largest economies in the world. Now the US and China are significantly ahead of other countries in terms of GDP, followed by Japan and Germany, then India, Great Britain, France, Italy, Canada and Brazil. At the same time, Indonesia, as well as the Philippines and Vietnam, can grow tenfold due to the relocation of part of the production from China and the influx of foreign investment, but this is threatened by the movement of production closer to consumers, as well as climate change, which is expected to affect developing countries more. Experts also point to the risks of social and political instability in the event of an uneven distribution of the “fruits” of new growth.

Tatyana Edovina