China is set to overtake the US to become the world’s biggest economy five years earlier than previously thought, thanks in part to its handling of the coronavirus pandemic, according to a think tank.
The Centre for Economics and Business Research (CEBR) says China will become the world’s major economic force in 2028.
In an annual report, the CEBR said: “For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China.
“The COVID-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China’s favour.”
The think tank described China’s management of the pandemic as “skilful”, citing its strict early lockdown.
The coronavirus began in China late in 2019 and the country was the first to shut down and the first to reopen after the virus was declared under control in March.
During the first quarter of this year, the country’s gross domestic product (GDP) slumped in its worst performance for decades.
But in July, the country reported second-quarter growth of 3.2% compared to the same time last year.
The CEBR says China is expected to average economic growth of 5.7% a year from 2021 to 2025 before slowing to 4.5% a year from 2026 to 2030.
The US, with 330,000 reported COVID deaths compared to the 4,770 reported in China, is expected to rebound strongly in 2021.
However, its growth is forecast to slow to 1.9% a year between 2022 and 2024 before falling further to 1.6% after that.
The US saw its economy fall by 31.4% in the second quarter before climbing at an annual rate of 33.1% in the third quarter – but it is still below where it was in the fourth quarter of 2019 before the pandemic began.
Japan is expected to remain in third place in dollar terms but is likely to be overtaken by India in the early part of the next decade.
This would push Germany from fourth to fifth place.
The UK, currently the fifth-biggest economy according to the CEBR, is expected to fall to sixth place by 2024.
However, GDP in dollars is expected to be 23% higher than that in France by 2035, mainly thanks to the growing digital economy.
The CEBR said the world’s pandemic recovery would likely be dominated by higher inflation rather than slower growth – a challenge to governments like Britain’s which have borrowed huge sums to find COVID responses.
“We see an economic cycle with rising interest rates in the mid-2020s,” the report said, “but the underlying trends that have been accelerated by this point to a greener and more tech-based world as we move into the 2030s.”