The Carnegie Endowment for International Peace released a study on July 9 concluding that Chinas economy will overtake that of the U.S. by 2035 and be twice its size by midcentury. The report by economist Albert Keidel said China's rapid growth is driven by domestic demand more than exports, which will be sustainable over the coming decades.
"China's growth this decade has averaged more than 10% a year and is still going strong in the first half of 2008. Because its success in recent decades has not been export-led but driven by domestic demand, its rapid growth can continue well into the 21st century, unfettered by world market limitation," Keidel writes.
Under current market-based estimates, China's gross domestic product is about $3 trillion compared to $14 trillion for the United States. Based on a more controversial purchasing power parity (PPP) measure used by the World Bank and others to correct low labor-cost distortions, he said China's GDP is roughly half of that of the United States.
Keidel's calculations suggest that using the PPP method, China will catch up with the U.S. as an economic power by 2020, with an equivalent GDP of $18 trillion. Based on the more commonly accepted market method, the turning point will come by 2035. By 2050, he estimated Chinese GDP at some $82 trillion compared with $44 trillion for the United States.
The dramatic economic change will make help China become a more important power in other areas including military and diplomatic affairs, according to Keidel. "China's financial clout will spill into every conceivable dimension of international relations. Leadership of international institutions will gravitate toward China. This movement could include the equivalents at that time of the United Nations, the World Bank, the International Monetary Fund, regional international development banks, and more specialized bodies. Various headquarters could shift to Beijing and Shanghai."
He said the U.S. "will have an important secondary influence, like Europe, but it will need to compromise, and its sphere for unilateral action will be increasingly curtailed."
However, the Chinese standard of living will remain lower -- with per capita GDP in China between half and two-thirds the level of that in the U.S. in 2050, according to the report. Keidel said poverty will remain a significant problem in China for decades despite considerable progress.
Another significant hurdle for China will be handling the social problems accompanying its economic rise. "For a country with China's rapid pace of change, social unrest seems inevitable," he said. He also said that Communist Party rule poses possibly "its greatest barrier to sustained rapid economic expansion" but that China "has a real chance of continuing its introduction of participatory governing mechanisms, including an eventually more broad-based system of elections."
Copyright Agence France-Presse, 2008