Just The Facts

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.

Credit: Casper1774 Studio Shutterstock.com

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.

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.

Tags: , , , ,

Responses to “China’s Economy Will Be Larger Than U.S. by 2028”

Archived Comments.

  1. On September 27, 2015 at 2:11 pm Fojar38 responded with... #

    It’s strange that the article keeps saying “only” 40% smaller. At this point closing the gap with the US even if the US posted 0% growth going forward would require the Chinese economy to almost double in size to match it, something that is unlikely to happen as the limits of easy growth are starting to be met in China along with its demography becoming less and less favorable each year.

  2. On September 27, 2015 at 3:02 pm panasian responded with... #

    This article confuses the readers. From the start,it should have explained there are two ways to measure GDP. One way is using nominal exchange rate and the other one is using PPP ( purchasing power parity. Specially #3 and 4 figures would be confusing to the people who are not familiar with the two systems.

  3. On September 27, 2015 at 3:27 pm panasian responded with... #

    In PPP( purchasing power parity) terms, China’s economy already overtook the U.S. economy at the end of 2014. What this author is talking about ( China overtaking the U.S. by 2028) is the GDP based on nominal exchange rate terms. China also has a good chance to overtake the U.S even nominal exchange rate terms sometime between 2022 and 2026. When you calculate GDP in nominal exchange rate terms, you have to factor in not only growth rate but also inflation rate, change in currency exchange rate. I think America has a more serious demographic problem than China. The American whites’ fertility rate has been declining. Also America is aging almost as fast as China. By the middle of this century, there is a good chance the low IQ-Hispanics and blacks would be a majority n America. Do you really think that’s good for the future of America?

  4. On September 27, 2015 at 8:52 pm matimal responded with... #

    So Valuewalk and theglobalist are CCP propaganda sites. Got it…

  5. On September 27, 2015 at 9:34 pm panasian responded with... #

    So many dumb Tea baggers !!!!

  6. On September 27, 2015 at 10:05 pm panasian responded with... #

    Frankly, I don’t give a damn about the CCP. That’s not my cup of tea. But I find quite a few DUMB Tea Baggers here, LOL !!!!

  7. On September 27, 2015 at 10:11 pm matimal responded with... #

    What does that have to do with my comments?

  8. On September 27, 2015 at 10:40 pm panasian responded with... #

    If you don’t know that, then you are not as smart as I thought.

  9. On September 28, 2015 at 3:44 am usetheguillotine responded with... #

    “good chance the low IQ-Hispanics and blacks would be a majority”

    Did you mean the “low IQ-Hispanics and blacks” would take over from the low-IQ whites currently running the US congress?

  10. On September 28, 2015 at 6:56 am panasian responded with... #

    Wow, you read my mind !!!! Your reply has to be the best one yet !!!

  11. On September 28, 2015 at 10:10 am China Lee responded with... #

    Right now, the IMF nominal GDP numbers for China and the United States are misleading. It is a comparison of apples to oranges. China is still using the antiquated SNA 1993 (System of National Accounts) method. The US is using the SNA 2008.

    Chart (US and China both using SNA 2008): http://i.imgur.com/48NqB9y.jpg

    We want to conduct an apples-to-apples comparison of Chinese and US nominal GDP using the same SNA 2008 method.

    For 2014, US nominal GDP under SNA 2008 was $17.4 trillion (see IMF data).

    For 2014, China’s nominal GDP under SNA 2008 was $11.5 trillion (see Center for Strategic and International Studies 224-page report calculating China’s nominal GDP under SNA 2008).

    Let’s project US and Chinese nominal GDP into the future.

    For the United States, the economic growth has historically been 2% (e.g. 1% for technological improvement and 1% for labor force growth). US inflation averages 2%. Thus, the US will grow by 4% annually (e.g. 2% economic growth + 2% inflation) over the long term.

    For China, the new economic growth is 7%. The years of 10% economic growth is over, because all of the low-hanging fruit has been plucked (when China joined the WTO in December 2001). We expect China to maintain an economic growth of 7% for the next ten years, because the Belt-and-Road initiative should integrate the Southeast Asian, Central Asian, and Russian economies with China’s.

    Chinese inflation averages about 3% (e.g. typically 1% higher than US inflation). Thus, China will grow by 10% annually (e.g. 7% economic growth + 3% inflation) over the next ten years.

    Yearly Comparison of US and Chinese Nominal GDPs under SNA 2008
    Chart: http://i.imgur.com/JpzRmav.jpg

    By projecting US 4% and Chinese 10% economic growth into the future, we see that China will surpass the US in nominal GDP by 2022. The IMF says that China’s currency is fairly valued. I am assuming a stable Chinese Yuan-US Dollar exchange rate at 6.4 Yuans to the Dollar.

  12. On September 28, 2015 at 12:32 pm usetheguillotine responded with... #

    And which one of those groups do you belong to?

  13. On September 28, 2015 at 2:26 pm hiiq responded with... #

    Can anyone comment meaningfully on whether China’s GDP uses/abuses hedonic and imputed values to the extent the USA does?

    When I last checked, these two synthetic components had added about $5 trillion to the USA’s GDP that never actually happened.