Recent forecasts have pushed the date further into the future
ago China’s economy was only 14% as big as America’s . But it was not too soon for bold economists to begin speculating about when China’s GDP might eclipse America’s to become the largest in the world. In an influential paper published in 2003, Goldman Sachs, a bank, predicted that the decisive year would be 2041. By the time of the global financial crisis in 2007-09, that forecast looked timid.
Five years later, this bullishness seemed silly—not because China’s growth disappointed our expectations, but because its exchange rate, adjusted for inflation, abruptly stopped strengthening. China clumsily devalued the yuan in 2015, spooking investors who feared further declines in the currency. The country’s date of arrival as the world’s largest economy receded into the distance.
These postponements of China’s date with economic destiny have cast some doubt on whether it will ever happen. The country’s productivity growth has slowed and its demographics have turned. China’s workforce is already shrinking, a decline that will probably accelerate in future decades. The UN projects that China’s population aged 15-64 will decline by more than 100m in the 2030s.
That prediction may be too gloomy. Other forecasting outfits, including the OECD, the Lowy Institute, and the Centre for Economics and Business Research, project that China’s GDP will overtake America’s at some point in the 2030s. EIU, for example, now thinks it will happen in 2039. That prediction is strikingly close to Goldman Sachs’s original date, set 20 years ago.
China’s economy has had its ups and downs over the past two decades. As a result, expectations of its fate have come full circle. Sometimes the future is easier to see from a distance.
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