Why China is Unlikely to Overtake the U.S. as the World's Largest Economy

[Frodo]

Why China is unlikely to overtake the United States to become the biggest economy in the world

A new study by Lowy Institute researchers Roland Rajah and Alyssa Leng casts doubt upon the speed with which China can achieve the dubious honour of claiming the crown and questions whether it will ever become the most powerful.

"China would overtake the United States to become the world's largest economy in nominal US dollar terms by about 2030," the report's authors conclude.

"But it would never establish a meaningful lead ... and would remain far less prosperous and productive per person than America, even by mid-century."

Most research concludes that China will be able to motor along with around 5 per cent annual economic growth until 2050.

If it did, it would be the world's biggest economy by a country mile, with the capacity to be its own bloc.

It is those kinds of projections that have created fear and angst among many Western nations, including Australia, on how best to deal with a global economic powerhouse of such magnitude that does not adhere to democratic norms.

This new study paints a vastly different picture of the future.

[Del Tachi]

Bigger economies grow slower; perpetual 5-7% growth was never a realistic outcome for China. 

[The Mikado]

Noah Smith likes to point out that if China's rapid growth starts petering out right when its nominal GDP is on par with the USA's, that's actually a pretty terrible outcome and in line with the middle income trap (after all, there's four Chinese people to every one American, so if US and China are at parity in 2030, Chinese GDP per capita will still be 1/4th of the US). China wants to be at least 50% larger than the US economy before its rapid growth stops, and doesn't look likely to get there.

[President Johnson]

Thanks for sharing this, interesting article. I certainly hope this will prove to be true.

[Person Man]

Noah Smith likes to point out that if China's rapid growth starts petering out right when its nominal GDP is on par with the USA's, that's actually a pretty terrible outcome and in line with the middle income trap (after all, there's four Chinese people to every one American, so if US and China are at parity in 2030, Chinese GDP per capita will still be 1/4th of the US). China wants to be at least 50% larger than the US economy before its rapid growth stops, and doesn't look likely to get there.

Then again, we are talking nominally. Wouldn't standard of living more coincide with what is being generated on a PPP basis? For example, when I was working with the outsources, most of my coworkers were living in either Hyderabad or Chennai. One of them at my experience level was making about "a lakh a month", or about 15k a year. However, rent was 200 a month and food and medicine was about a quarter of the cost it is here. Tylenol here is 6 dollars. There, the same bottle is 100 rupees.