China was ranked 13th in the global economic rankings in 2000, but in just a decade, it rose to become the world’s second-largest economy, behind the US, which held the top spot as the largest economy in the world. Since 2010, China has consistently maintained its second-place position and is currently in the process of gradually increasing its economic value even further. This has led to the commonly asked question of whether China will ever surpass the US economy, and if so, how long will it take China to surpass the world’s largest economy? In this article, we will explore this question and try to find an answer.
How is China’s economy going so far?
In 2013, China surpassed the US as the world’s largest economy, but only in terms of purchasing power parity (PPP). According to the World Bank, China held around 19% of the world’s total economy in PPP terms. However, it is important to note that China remained a developing country according to the World Bank’s classification. In 2017, China again surpassed the US in PPP terms, with the World Bank reporting a PPP-based gross domestic product (GDP) of US$19.617 trillion for China, while the US’s PPP-based GDP was US$19.519 trillion at the same time.
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Despite China’s impressive economic growth, there are several challenges that impede its influence on the global economy and its efforts to strengthen its economic power. These challenges include rising political tensions between China and the US, continued US pressure on China, and the ongoing impact of the COVID-19 pandemic. These factors have the potential to slow down China’s economic growth and impact its ability to surpass the US economy in the near future.
On the other hand, strengthening its own economic power is crucial for China to maintain its dominant position and compete with the US. However, China acknowledges its weaknesses in many areas compared to the US. As a result, experts and international organizations often compare China and the US based on various macroeconomic indicators, such as GDP and trade volume, to determine their respective positions in the global economy.
Although China has already surpassed the US in terms of GDP based on purchasing power parity (PPP), when measuring PPP per capita, China still lags behind the US by a significant margin, ranking 75th out of 183 countries in the world. Even if this rate were to continue through to 2030, economists predict that China would still be around half the size of the US in PPP per capita terms.
Living standard of China
When considering factors that affect living standards, it becomes clear that China still has a long way to go before it can claim the top spot in the world economy. Living standards are crucial indicators of a country’s economic capability, as they directly impact a person’s quality of life. Unfortunately, widespread inequality in China’s income and wealth distribution has created tension within the country, further complicating its path towards becoming the world’s largest economy. A 2017 survey found that just 1% of China’s population controls 47% of the country’s wealth and income, with the next 4% holding a total of 16.4%. The remaining 95% of the population must share the remaining 36.6%, highlighting the significant wealth disparity in the country. This unequal distribution of income and wealth is yet another factor hindering China’s ability to surpass the US and become the world’s largest economy.
Economic structure: US Vs China
Agriculture is a notable sector of China, which adds around 10% to the total country’s economy. On the other hand, this rate is only 1% in the case of the US. But another factor to note here is that China’s economy is investment-driven, whereas the U.S. economy is private consumption-driven. So the US is likely to spend less on sectors like agriculture.
When considering productivity levels, the US still surpasses China. For instance, the US only requires 1.4% of its employed population to cultivate 1% of agricultural products, while China needs 32.6% of its population to cultivate 10% of agriculture product. However, the Chinese government has recognized this issue and is taking steps to modernize its agricultural sector by incorporating advanced technologies.
China has surpassed the US by a significant margin in terms of manufacturing. The manufacturing sector adds around 30% of the total value to China’s economy, while it only accounts for 13.2% in the case of the USA. However, this growth rate in China has been declining in recent years, whereas the US has seen a gradual increase. For example, in 2010, China’s manufacturing value-added rate was 32.9%, indicating a decline in recent years.
Any hope for China?
According to economists, the US will continue to lead for more than 50 years without any significant challenges from China, despite China’s recent economic progress. While the COVID-19 pandemic initially gave China hope of surpassing the US by the 2030s, economists believe that this is unlikely to happen anytime soon. Recent forecasts show that China’s GDP per capita is still at $10,582.10, which is significantly lower than the US’ per capita GDP, which is about six times larger at approximately $63,051.40.
When comparing factors such as productivity, consumer spending, population trends, income distribution, income-saving ratio, anti-corruption measures, ease of doing business, expenditure on research and development, and many other factors, it is clear that the US economy is performing better than the Chinese economy. The US leads in almost every area of the market, making it challenging for China to overtake the US in the near future, despite its progress. Therefore, while China’s economy is growing, it may take some time before it can overtake the US in terms of overall economic performance.