China to Become World’s First Economy by 2032 if Global Trends Continue
AP Photo/ Andy WongBusiness12:38 27.12.2017(updated 12:39 27.12.2017) Get short URL120
A new global economic report claims that mainland China could surpass the US as the world’s largest economy in dollar terms by 2032, if the existing trends in national economies and international trade hold firm.
Kristian Rouz – Mainland China’s economic success based off its massive manufacturing sector could further bolster the nation’s standing in international affairs within 15 years, a new report reads. However, there are certain implications to the forecast, which takes into account only existing trends in global trade and the domestic economies of the US, the Eurozone and mainland China.
Analysts of the Centre for Economics and Business Research (CEBR) claim that in 2032, mainland China will overtake the US as the world’s largest economy, whilst India will come in third – surpassing France and the UK. Japan is expected to rank fourth, Germany fifth and Brazil sixth.
“Despite temporary setbacks… India’s economy has still caught up with that of France and the UK and in 2018 will have overtaken them both to become the world’s fifth largest economy in dollar terms,” Douglas McWilliams, deputy chairman at CEBR, said.
READ MORE: India Has Capability to Outperform British, French Economies – Analyst
According to CEBR’s annual World Economic League Table, cheaper energy and technology prices will drive economic expansion in the economies of the Asia-Pacific region in the coming decade. These factors will also provide an economic boost to Indonesia and South Korea – both will expand into the world’s 10th and 8th largest economies, respectively, by 2032.
This comes amidst the rise of high-tech manufacturing and the financial services sectors in Asia, making the region’s urban areas increasingly prominent economically.
“The world’s urban centre will continue to shift eastwards, particularly as growth in a number of cities in the West is likely to be constrained by aging, and in some cases, declining, population,” Mark Britton of Oxford Economics wrote in a separate study.
These developments will make Asian economies larger in dollar terms, however, the future of the dollar remains uncertain amidst the pivot to economic nationalism in the US. As the Trump administration-led resurgence in US manufacturing gains momentum, the study’s findings might raise questions.
First, the costs of technology might reverse their decline as the US tightens its grip on intellectual property rights. Coupled with a reversal in the offshoring of manufacturing facilities from the advanced economies into emerging markets, this could contribute to a slowdown in economic expansion in the Asia-Pacific region.
Second, the rising corporate and provincial debt in mainland China, as well as shifting patterns in the international trade of manufactured goods could contribute to a slowdown in the country’s manufacturing output. This also applies to other prominent regional exporters, such as South Korea and Indonesia.
However, CEBR researchers suggest the existing global economic trends are sustainable enough to weather any possible changes in the structure of international exchange in goods and services.
“Because the impact of President Trump on trade has been less severe than expected, the USA will retain its global crown a year longer than we anticipated in the last report,” CEBR report said.
The researchers also said Russia is poised to drop from 11th place to 17th by 2032 due to its excessive reliance on oil exports. The report overlooks the developments in Russia’s manufacturing and high-tech sectors, stressing declining global energy prices as the main reason for the projected deterioration.
This observation does not apply to Brazil, however, which is also exposed to fluctuations in oil prices and is heavily reliant on crude exports, yet is poised to maintain its position within the top ten.
READ MORE: How China’s Plan to Open its Economy to the World Could Be Mutually Beneficial
Another issue is that all the economies on the list are measured in dollars terms, as the US national currency remains the main means of international settlements, and therefore, a universal measure of consumer purchasing power and a country’s overall economic well being.
Researchers emphasized the rising prominence of urban areas in global economic development, also saying technology will contribute to global economic acceleration the most.
“The interesting trend emerging is that by 2032 five of the ten largest economies will be in Asia while European economies are falling down the ranking and the USA loses its top spot,“ Oliver Kolodseike, a CEBR senior economist, said. “Technology and urbanisation will be important factors transforming the world economy over the next 15 years.”
According to a separate estimate from the World Bank, global economic growth is set to accelerate to 2.9 percent over the two coming years.
Meanwhile, some economists believe another global recession could strike in the early 2020s, hampering the demand for energy, and bringing cost-saving technology (such as automation in services and manufacturing) into the spotlight.