China set to surpass U S as world’s biggest economy by 2028 says report
China is set to overtake the U.S. economy several years earlier than expected due to the coronavirus pandemic, analysts say.
According to preliminary estimates of the US government, the country’s GDP in 2020 decreased by 2.3% to $ 20.93 trillion.
China’s economy, by contrast, gained 2.3% last year, reaching 101.6 trillion yuan. Thus, the Celestial Empire is only 6.2 trillion dollars behind the volume of the United States. In 2019, this difference was $ 7.1 trillion..
«The numbers show that the pandemic has dealt a much bigger blow to the US economy than China. We believe that the size of China’s economy in dollar terms will overtake the United States in 2028», – said Rob subbaraman from Nomura.
«If the Chinese currency strengthens to around RMB 6 per dollar, the change of leader could happen two years earlier than expected — in 2026», – he added.
The yuan has begun to strengthen against the US currency over the past six months to levels not seen in over two years..
Recall that Covid-19 first appeared at the end of 2019 in the Chinese city of Wuhan. In an effort to control the virus, authorities shut down more than half of the country’s economy in February 2020. Urban Unemployment Reaches A Record Of 6.2% in the same month. GDP contracted by 6.8% in the first quarter.
The outbreak was curbed a few weeks later and the economy returned to growth in the second quarter..
Meanwhile, the coronavirus has spread widely overseas and has become a global pandemic, hitting the United States hardest.. It was there that the largest number of deaths and infections was registered..
America’s unemployment rate rose above 14% in April and did not fall below 10% for another three months.
«Latest GDP data shows China’s recovery had strong momentum towards the end of 2020, thanks to its ability to contain the pandemic», – said Tai Hui, Chief Asian Market Strategist at J. P. Morgan Asset Management. He expects that it will take another eight to ten years for China’s GDP to finally catch up with the gross product of a Western competitor..
Hui believes that new government restrictions related to the emergence of coronavirus outbreaks in China in the past few weeks are likely to negatively affect economic growth in the first quarter, while the United States will benefit from government support adopted at the end of last year..
«GDP is just a benchmark. Investors should also consider differences in economic structure, earnings, development and competitive advantage when making decisions.», – he thinks.
Economists, concerned about sustained long-term growth, tend to believe that traditional industries such as manufacturing, rather than increased domestic consumption, played a major role in China’s recovery last year..
As overseas demand for face masks and other medical protective equipment has skyrocketed, China’s exports gain 3.6% in dollar terms in 2020, while imports fell 1.1% over the same period.
China’s trade surplus with the United States surged to $ 317 billion in 2020, up from $ 296 billion a year earlier, although the two countries signed a trade agreement last January in an attempt to narrow that surplus..
On the other hand, China’s domestic consumption did not recover as quickly as the rest of the economy..
Retail sales fell 3.9% in 2020, while in the US they grew 0.6%.