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China is the only major global economy that will have expanded in 2020 (Photo: STR/AFP via Getty Images) © Provided by The i China is the only major global economy that will have expanded in 2020 (Photo: STR/AFP via Getty Images)

China is set to overtake the US to become the world’s largest economy by 2028, which is five years earlier than previously forecast, according to a new report.

The UK-based Centre for Economics and Business Research (CEBR) said China’s “skilful” management of Covid-19 would boost its relative growth compared to the US and Europe in coming years.

Japan is expected to remain the third-largest economy until the early 2030s, when India could overtake it, pushing Germany to the fifth spot. 

The CEBR releases its economic league table every year on 26 December; although China was hit by coronavirus first, it managed to control the virus through strict action, meaning it did not need to implement successive economically repressive lockdowns, like countries in Europe.

Consequently, unlike other major economies, it has bypassed an economic recession in 2020, and is even anticipated to grow by two per cent this year.

A soft power struggle

a group of people in a room: A medical worker wearing a protective suit collects a swab sample from a local resident for coronavirus (COVID-19) antigen test at a temporary COVID-19 testing center on December 23, 2020 in Dalian, Liaoning Province of China. (Photo: VCG/VCG via Getty Images) © Provided by The i A medical worker wearing a protective suit collects a swab sample from a local resident for coronavirus (COVID-19) antigen test at a temporary COVID-19 testing center on December 23, 2020 in Dalian, Liaoning Province of China. (Photo: VCG/VCG via Getty Images)

In contrast, the US economy has been hit hard by the world’s worst coronavirus epidemic in terms of casualties, with more than 330,000 people having died, and approximately 18.5 million confirmed cases.

The economic damage has been softened by monetary policy and a large fiscal stimulus, although political disagreements over a new stimulus package are expected to leave around 14 million Americans without unemployment benefit payments in the new year.

The CEBR report said: “For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China. The covid-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China’s favour.”

The report says that after “a strong post-pandemic rebound in 2021”, the US economy will grow by about 1.9 per cent annually from 2022-24, and then slow to 1.6 per cent in the years after that.

By contrast the Chinese economy is tipped to grow by 5.7 per cent annually until 2025, and 4.5 per cent annually from 2026-2030.

A high-income economy

China‘s share of the world economy has risen from just 3.6 per cent in 2000 to 17.8 per cent now, and the country will become a “high-income economy” by 2023, according to the report.

The Chinese economy is not only benefiting from having controlled Covid-19 early, but also aggressive policymaking targeting industries such as advanced manufacturing, said CEBR deputy chairman Douglas McWilliams.

Speaking to the BBC, he said: “They seem to be trying to have centralised control at one level, but quite a free market economy in other areas.

And it’s the free market bit that’s helping them move forward particularly in areas like tech.”

However, the average Chinese person will remain far poorer in financial terms than the average American even after China becomes the world’s biggest economy, as China’s population is four times bigger.