A Japanese study predicted China to surpass the US by 2028 and 2029. But China’s current economic difficulties and US recovery are having an impact. New COVID-19 outbreaks are slowing domestic consumption, which is one of Xi Jinping’s key goals, reports PIME Asia News .
JCER’s prediction
China should become the world’s largest economy in terms of GDP by 2033, four years later than previously expected, according to the Tokyo-based Japan Center for Economic Research (JCER).
Last year, the Japanese think tank predicted that China’s nominal GDP would exceed that of the United States by 2028 if the COVID-19 pandemic became a more serious threat, or 2029 if the pandemic followed a standard scenario.
Now the change is set to take place when the economies of the two countries reach US$ 35 billion each. Currently, the US GDP is around US$ 23 trillion while that of China tops US$ 16 trillion.
The slow down
In addition to an improving US economy, the four-year delay is due to China’s ongoing difficult economic situation, the JCER notes.
Beijing is damaging the country’s growth potential by clamping down on high-tech and other big industries, which is likely to slow down labour productivity. Efforts to decarbonise for the fight against climate change and the danger of bankruptcy for real estate giants such as Evergrande are additional factors.
The financial restrictions introduced by the government to contain investment in construction, a sector that has hitherto been a driving force of the Chinese economy – deemed excessive, will also have an impact.
For China, data continues to be discouraging. According to the National Bureau of Statistics (NBS), retail sales, a key measurement of consumer spending in the world’s most populous nation, grew by 3.9 per cent in last month compared with a year earlier, down from the 4.9 per cent increase in October. This was below the estimate for a rise of 4.6 per cent.
The increase in domestic consumption is a primary objective of Xi to reduce the country’s dependence on exports.
COVID
The slowdown in consumption is mainly affected by the repeated COVID-19 outbreaks, in 21 provinces between mid-October and the end of November.
Recently, a new outbreak has hit the rich industrial province of Zhejiang, with local authorities adopting restrictions, including the closure of factories.
China’s year-on-year economic growth is expected to drop below 4 per cent in the fourth quarter of 2021, way down from an 18.3 per cent rise in the first quarter, with reference to the lower levels of 2020.
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Source: PIME Asia News
