For many years, experts have assumed that China was well on its way to surpassing the USA as the world’s largest economy and that the country was going to take the number one spot as soon as the 2030s.
However, due to the country’s recent economic struggles, financial researchers are now saying that China will never become the world’s leading economy.
China Was Well on Its Way to Becoming the #1 Global Economy
For decades, China has been considered a world power with an incredible global economy, which was slowly catching up to that of the United States.
In fact, according to Investopedia, in 2022, the United States’ GDP sat at $23 trillion with 5.7% annual growth, and China’s GDP was $17.7 trillion with a projected 8.1% annual growth. To understand just how far ahead these two countries are doing: Japan took the number three spot with only $4.9 trillion GDP and a 1.6% growth rate.
China’s Current Struggling Economy
However, China’s economic growth has slowed to a near stop in the past few years. Throughout the global coronavirus pandemic, China saw an extreme decrease in GDP due to the country’s extreme lockdown practices.
According to the National Bureau of Statistics of China, the consumer price index fell 0.3% this year for the first time in years. Which essentially means that the country is experiencing extremely weak consumer demand.
Why Did the Pandemic Affect China So Greatly?
The whole world suffered during the coronavirus pandemic in 2020, and almost every major economy saw historic drops in GDP.
But there’s no doubt that China’s economy took one of the biggest hits. Most agree that this was due to the extreme lockdown procedures the government put in place for several years during the pandemic. Without open businesses or consumer purchases for several years, of course, the GDP declined significantly.
China’s “Post-COVID Rebound” Is Slowing Down
But while most countries have been slowly recovering and are on their way back to their pre-pandemic growth rates, China is lagging behind.
But Bloomberg Economics said, “The post-Covid rebound [in China] has run out of steam, reflecting a deepening property slump and fading confidence in Beijing’s management of the economy. Weak confidence risks becoming entrenched — resulting in an enduring drag on growth potential.”
Beijing’s Unstable Property Market Affects China in a Big Way
It’s not just a lack of consumer engagement negatively affecting China’s GDP. The real estate market, especially in Beijing, is also in a serious slump.
Throughout the last thirty-odd years, China’s growing population meant increased real estate development and seemingly never-ending growth within the industry. However, after years of borrowing and over-building, it seems that the real estate industry is essentially collapsing in on itself in China’s capital city.
How Will China’s Unimpressive Economy Affect Global Growth?
China’s lack of economic growth, decline in GDP, unimpressive consumer engagement, and real estate struggles will affect not only the country but the economy of the entire planet. At this moment in time, China still accounts for 30% of global economic growth, which means that if China struggles, the global economy will undoubtedly decline as well.
Head of the China Center at the Conference Board, Alfredo Montufar-Helu, told the media, “As its economy continues facing downward pressures, its growth momentum might slow down further, in turn exacerbating the already significant pressures that the global economy is facing.”
China May Surpass the USA in the 2040s, But Not for Long
According to data collected by Bloomberg Economics, there is a chance that China’s economy will rebound and surpass that of the United States sometime in the 2040s.
However, analysts believe that even if this does occur, China will only take the lead by a “small margin,” and it won’t be long before they fall behind once again.
Was the US Economy Affected by the Pandemic?
China was certainly not alone in its economic struggles during the global pandemic. In fact, during the second quarter of 2020, the US GDP fell by an incredible 8.9%, which was the largest drop in more than 70 years. And in 2021, the country’s GDP dropped another 5.2%.
However, the United States government acted extremely quickly and enacted substantial relief measures among citizens and businesses to attempt to get a hold of the intense economic decline.
Has the US Economy Rebounded After the Pandemic?
The US government’s actions absolutely helped ensure that the country’s economy didn’t fall as far as it could have. These choices have also led to a much quicker economic recovery than many other countries are experiencing, including China, of course.
Today, the USA’s GDP is up 2.47% from last year. While the economy certainly isn’t perfect, with housing prices on the rise and the Federal Reserve working tirelessly to bring down inflation, it seems the US has survived the pandemic and will continue to grow its GDP in the coming years.
China Will Stay at the Top of the Economic Ladder
It’s important to note that even though it doesn’t seem as if China will take the number one spot from the United States any time soon, the country still comfortably sits as the second-largest economy on the planet.
And while China’s growth is slowing, unless something changes drastically, the country will likely remain in the number two spot for the foreseeable future.
Will the USA Remain the Largest Economy on the Planet?
China was really the only country even close to taking the number one spot on the GDP ladder. So while the country struggles to recover from the pandemic and get its economy back on track, it looks like the USA can sit comfortably knowing that no other country will surpass it.
Of course, the financial analysts who study economic growth are only making predictions based on the current world we live in, and this could all change tomorrow.
