China’s Economic Size to Exceed the US by 2025
April 01, 2008 | BY
clpstaffChina will maintain its position as a favourable investment destination in the long run as the Chinese economy is expected to become the world's largest…
China will maintain its position as a favourable investment destination in the long run as the Chinese economy is expected to become the world's largest economy by 2025, overtaking that of the US, according to a new report from PricewaterhouseCoopers.
Investors have been cautious about market volatility recently. With the prospect of a US recession, investors may look to shifting their investments from the US to other countries.
“The global centre of economic gravity is already shifting to China, India and other large emerging economies, and our analysis suggests that this process has a lot further to run,” said John Hawksworth, head of macroeconomics at PricewaterhouseCoopers.
Apart from Brazil, Russia, India, and China [BRIC nations], the report – The World in 2050: Beyond the BRICs – also looked at, for the first time, an additional 13 emerging economies that also have the potential to overtake the established Organisation for Economic for Economic Co-operation and Development [OECD] countries. Investors, according to the report, need to look beyond the BRICs for future growth opportunities.
Nevertheless, China will become the world's largest economy and will continue to grow to around 130% of the size of the US by 2050, while India could grow to almost 90% of the size of the US by 2050. Brazil would likely to overtake Japan by 2050 to move into fourth place, while Russia, Mexico, and Indonesia all have the potential to have economies larger than those of Germany or the UK by the middle of this century, Hawksworth said.
China's future growth would mostly be attributed to the nation's technological development, which would boost both efficiency and economic growth for the next 10 to 15 years. In addition, Hawksworth said that higher Chinese productivity growth relative to the US implies the likely appreciation of the Chinese exchange rate.
By 2020, the rapid growth of China would likely turn the country into the second largest consumer market in the world, while cities across leading emerging markets from Shanghai to Mexico City will have rapidly growing middle class populations with the spending power to afford Western consumer goods and services, according to the report.
Hawksworth added that the rapid growth of the emerging economies should prove to be a boost for OECD economies through growing income from exports and overseas investments, even as the OECD share of world GDP declines. Among all the industries, retailers would be the ones who have the most potential to benefit from lower-cost imports into their OECD markets, he said.
“But of course, retailers need to be savvy enough to identify the right business strategies and local partners for such overseas ventures. This has not always been the case for overseas investments by retailers in the past, particularly in culturally unfamiliar territories such as China or India,” Hawksworth said.
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