China will overtake the U.S. to become the world’s largest economy by 2028, according to a new report by an economic study group, aided by its rapid and successful response to the COVID-19 coronavirus pandemic, while its Western rivals they lost control of the virus.
The British Center for Economic and Business Research released its annual report on Saturday, suggesting that the economic consequences of the pandemic mean that China will surpass the United States five years earlier than previously estimated.
“For some time, a comprehensive theme of the global economy has been the struggle for economic and soft power between the United States and China,” wrote CEBR, quoted by Reuters. “The COVID-19 pandemic and the corresponding economic consequences have certainly put this rivalry in favor of China.”
The pandemic originated in the Chinese city of Wuhan at the end of last year, before spreading around the world. China quickly introduced draconian restrictions to quell the spread, especially in Wuhan, where the entire city was cut off from the rest of the country for 76 days.
The tough measures – made possible by China’s authoritarian system – seem to have prevented the pandemic in China. Beijing reported 95,460 cases and 4,770 deaths, according to Johns Hopkins University. But elsewhere, the situation was much worse. Worldwide, there have been almost 80 million confirmed cases and more than 1.7 million deaths.
The United States has become the epicenter of the pandemic and cases are still rising rapidly. More than 18.7 million cases have been confirmed and 330,000 people have died. Blocking measures and public security fears have undermined the US economy and skyrocketed unemployment figures. Meanwhile, in China, life has returned to normal.
CEBR said that China should have an average economic growth of 5.7 percent per year from 2021 to 20, after which growth would slow to around 4.5 percent per year from 2026 to 30. The think tank cited China’s “skillful management of the pandemic” as one of the main drivers of expected growth.
The US, meanwhile, is likely to see a strong post-pandemic recovery in 2021, but growth will slow to around 1.9% per year between 2022 and 2024. Growth will slow further to 1.6% after that.
Elsewhere, Japan will remain the third largest economy in the world until it is overtaken by India in early 2030. This will also push Germany from fourth to fifth. Meanwhile, the UK will fall from fifth to sixth place in 2024, after its dissociation from the European Union.
Overall, CEBR said the pandemic is likely to cause higher inflation, rather than slower economic growth.
“We see an economic cycle with rising interest rates in the mid-2020s,” said the document, which will put pressure on governments that have taken out huge loans to support their economies during the pandemic turbulence. “But the underlying trends that have accelerated so far point to a greener, more technology-based world as we move into the 2030s.”
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