China's Economy vs America's: When Will the Overtake Happen?

The debate over when China's economy will surpass America's has shifted dramatically. Recent forecasts from Goldman Sachs and the OECD suggest China may never overtake the US, or if it does, it will plateau and then decline. Demographic issues, political constraints, and a shift toward high-quality growth are key factors. A poll of Economist readers shows 74% believe China will eventually become the world's largest economy, with most expecting it in the 2030s. However, some analysts argue China's growth runway is limited and it may lose ground to the US.
The Economist The Economist

English Transcript:

Let's try and put it all together then and talk about this uh extraordinarily important question that people have debated for a long time of when China might become the biggest economy in the world measured just in pure dollars at market exchange rates. Simon, we had a cover on this a few years ago about peak China uh and there was an extraordinary chart in this showing the various projections that have been made and how the debate has shifted. Do you want to talk us through that? Sure. Yeah. So on the horizontal axis you have years beginning at the start of

this century and stretching right out to 2070. And then importantly on the vertical axis what you're seeing are percentages. That's China's GDP as a percent of US GDP. So it's a comparison of China's GDP relative to America's. So when it gets to 100, it's level with America. So these are forecasts of where China will be relative to America made at different times in the past. Not only has the date at which China might overtake shifted but also the trajectory if you like of China after that point. So we used to assume that China would overtake at some point and then the lead would continue

growing. That view has changed and you know a few years ago Goldman Sachs updated their projections and had China overtaking a bit later and then plateauing. So the two were running roughly neck andneck uh for quite a few years out to 2070. Even more recently, the OECD now thinks that perhaps it'll never overtake at all. And you see this peak where it gets right level with America and then starts actually losing ground. And I think that's gives sort of economic meaning to this catchy phrase peak China. It's not that China's GDP will shrink. It's that China's GDP relative

to America will get close and then fall slowly away. Partly because of the demographic issues we've just been discussing. So, we asked people in the newsletter whether they thought China would ever become the world's biggest economy. And here is the verdict. We can see that a big majority uh 74% of viewers think that China will eventually overtake the US with a plurality saying it will happen in the 2030s. Only 26% of people agree with that OECD line from Simon's chart showing that China might never catch up with the US. Mike, let's start with you. Do you think China will ever

overtake the US for economic size? I think as it stands, I'm I'm with the 26% here. I'm I'm in the never camp. Um I think that's not because I think the Chinese economy does have some sort of life left in it yet. I think it's still very low income relative to where it could be. Um I think the demographic issue is really going to bite. Um one thing I would say here is I'm I'm partly less interested in the Chinese side where I think the misallocation and the demographics are a big problem. This seems to me more like it's the US is to lose. um if the US loses its dynamism

through uh various political constraints, if it turns uh to become very anti-immigration, its population growth slows considerably, um I can see the US losing its own lead more than I can see uh China sort of accelerating to supersede the US if the US doesn't get things wrong in that way. I'm in the never camp as well. I think uh I think that's partly it's it's a policy choice really for the government and we've seen in recent years they have deemphasized GDP growth targets. They're trying to emphasize what they call highquality growth which is ultimately growth

which is you not intended to generate uh optimal economic activity but to do other things to make the country powerful, strong etc. Uh and so for as long as that kind of policy holds I think it has some you know some runway yet uh that's unlikely to overtake America. So, I still think that China will overtake America, but America might subsequently reovert China. Uh, that's not a view that's original to me. I think it was first set out by Capital Economics, a research firm, and they said this is the ideal outcome because everyone gets to be right. Excellent. Well, uh,

I don't think I can beat that for fun. I think I'm probably in the never camp. Although, it seems to me that so much here depends on the AI race that uh you know, it's entirely possible to imagine uh China overtaking the US if somehow it managed to get ahead uh in AI. So, that's where I stand. But I like that even once it's overtaken, that's not the end of the matter.

More Business Transcript