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China’s Economy Will Be Larger Than U.S. by 2028

Currently, the Chinese economy is just 40% smaller than the U.S. when measured at market exchange rates.

September 27, 2015

Currently, the Chinese economy is just 40% smaller than the U.S. when measured at market exchange rates.

1. Back in 1980, the size of China’s economy was just $309 billion, as measured at market exchange rates in U.S. dollars.

2. That was roughly a tenth of the size of the U.S. economy in 1980 ($2.9 trillion).

3. By 2014, the gap between the size of the Chinese and the U.S. one has shrunk considerably, with China’s economy now reaching $10.4 trillion and the U.S. one $17.4 trillion in GDP.

4. That same year, U.S. GDP stood at $16.8 trillion at that time — or just about 4% larger than China’s economy.

4. Currently, the Chinese economy is just 40% smaller than the U.S. when measured at market exchange rates.

5. Measuring GDP at market exchange rates simply converts the value of all goods and services produced in each economy into a single currency (in this case U.S. dollars) using the current exchange rate.

6. This gives us a good idea of how large economies are relative to one another — similar to the way we compare the height of two people by having them stand back to back.

7. China’s growth has slowed considerably compared to the 10% annual growth rates of the past few decades.

8. However, it is still expected to maintain a significant growth advantage over advanced industrial economies such as the United States.

9. Consulting firm PricewaterhouseCoopers projects that China will grow at an annual rate of 4.6% between now and 2050, while the United States will grow by 2.4% a year.

10. Assuming no significant event (such as military conflict, political revolution or natural disaster) causes either country to deviate from these trajectories, China’s GDP at market exchange rates should overtake U.S. GDP in 2028.

Takeaways

China’s growth has slowed compared to the 10% annual growth rates of the past few decades.

China is expected to maintain a significant growth advantage over advanced industrial economies.

China’s GDP at market exchange rates should overtake U.S. GDP in 2028.