China will leapfrog the U.S. to become the world’s largest economy by 2028, according to a new report by an economic think tank, helped by its rapid and successful response to the COVID-19 coronavirus pandemic while its Western rivals lost control of the virus.
The British Centre for Economics and Business Research released its annual report on Saturday, suggesting that the economic fallout of the pandemic means China will surpass the U.S. five years earlier than previously estimated.
“For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China,” the CEBR wrote as quoted by Reuters. “The COVID-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China’s favour.”
The pandemic originated in the Chinese city of Wuhan late last year, before spreading worldwide. China quickly introduced draconian restrictions to snuff out the spread, especially in Wuhan where the entire city was sealed off from the rest of the country for 76 days.
The tough measuresâ€”enabled by China’s authoritarian systemâ€”appear to have stopped the pandemic in China. Beijing has reported 95,460 cases and 4,770 deaths, according to Johns Hopkins University. But elsewhere the situation has been much worse. Worldwide, there have been nearly 80 million confirmed cases and more than 1.7 million deaths.
The U.S. has become the epicenter of the pandemic and cases are still rising sharply. More than 18.7 million cases have been confirmed and 330,000 people have died. Lockdown measures and public safety fears have undermined the U.S. economy and sent unemployment numbers soaring. In China, meanwhile, life has largely returned to normal.
The CEBR said China is set for average economic growth of 5.7 percent annually from 2021-25, after which growth would slow to around 4.5 percent each year from 2026-30. The think tank cited China’s “skilful management of the pandemic” as a key driver of expected growth.
The U.S., meanwhile, will likely enjoy a strong post-pandemic recovery in 2021 but growth will slow to around 1.9 percent annually between 2022 and 2024. Growth would slow further to 1.6 percent thereafter.
Elsewhere, Japan will remain the world’s third largest economy until it is overtaken by India in the early 2030s. This will also push Germany down from fourth to fifth. The U.K., meanwhile, will slip from fifth to sixth by 2024 following its decoupling from the European Union.
Overall, CEBR said the pandemic was likely to drive higher inflation rather than slower economic growth.
“We see an economic cycle with rising interest rates in the mid-2020s,” it said, which will put pressure on governments that have borrowed huge sums to support their economies through the turmoil of the pandemic. “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.”