China is unlikely to surpass the US as the world's largest economy as initially predicted for the early 2030s, primarily due to a growing lack of confidence in the Chinese economy, according to Bloomberg Economics analysts.
New estimates from analysts suggest that China's GDP will only overtake that of the US in the mid-2040s. However, this lead will be temporary, and China will eventually fall back to the second position.
Bloomberg Economics analysts expressed their concern, saying, "China's economy is slowing down sooner than anticipated, mainly due to the post-pandemic recovery losing steam. This decline is exacerbated by problems in the real estate sector and a diminishing confidence in Beijing's economic management. The waning confidence poses a significant risk and could have long-lasting effects on potential growth."
Their projections indicate that China's economic growth will decrease to 3.5% by 2030 and drop to approximately 1% by 2050. These figures mark a decline from earlier estimates, which had projected growth rates of 4.3% and 1.6%, respectively.
China's economy grew by only 3% last year, one of the lowest rates in decades, primarily due to pandemic-related restrictions and a property market crisis. Although the lifting of these restrictions has raised hopes for a growth rebound, the situation remains challenging as exports decline and the real estate crisis persists. Economists surveyed by Bloomberg have downgraded their growth forecasts for 2024 to below 5%. In response, the US and the G7 are considering whether China's structural issues provide an opportunity for the West to strengthen its position against a weakening geopolitical rival. However, they are also mindful of the potential global economic repercussions of China's slowdown.
Furthermore, China is facing significant long-term challenges, including a population decline in 2022 – the first in decades – which raises concerns about diminishing productivity. Additionally, increased government control over the business sector is escalating tensions with the US and other Western governments.
In contrast, the US economy seems to be in better condition than previously expected. A robust job market, moderating inflation, and strong consumer spending have bolstered the belief that the US will avoid a recession for the time being. Goldman Sachs has reduced the likelihood of a recession from 20% to just 15%.
Bloomberg Economics anticipates US growth of 1.7% for 2022-2023, with long-term forecasts predicting a gradual slowdown to 1.5% by 2050.