Pages

April 23, 2009

China to be World's Largest Economy in about a Decade, says Deutsche Bank

China will overtake the U.S. in terms of economic output within a decade, according to estimates by Deutsche Bank's Chief Economist for Greater China, Jun Ma, who said he had to accelerate his forecast of the mainland's leadership in the global economy in view of favorable growth dynamics in emerging markets.

Goldman is raising China's GDP forecast to 8.3% for 2009 and Morgan Stanley and others are raising estimates to 7-8% GDP growth for China as well.

China will "massively invest" in these emerging economies using its nearly $2 trillion in foreign exchange reserves, extend its leverage by extending loans to the International Monetary Fund, and allow the yuan to appreciate in preparation for the currency's potential reserve status.

By the early 2020s, China will over the U.S. in terms of GDP, Ma said, noting the forecast is dramatically stepped-up from his views two years earlier.

"China's nominal GDP growth could surpass that of the United States within ten years, a period which will likely be accompanied by a gradual appreciation of the yuan," Ma said.


This site made a rough projection that China would pass the USA on a nominal GDP basis in 2021-2027 back in 2006.

Starting in 2007 this site has made more detailed projections that indicate that China would pass the USA on a nominal GDP basis in 2020 or earlier. The more recent projections of this site are for China to pass the USA in 2016-2017.


Year GDP(yuan) GDP growth USD/CNY China GDP China+HK US GDP US Growth
2007 25.8 13 7.3 3.5 3.7 13.8 1.1 Past Germany
2008 30.1 9 6.85 4.4 4.6 14.3 -3.1
2009 32.8 8 6.8 4.8 5.0 13.9 0.7 Passing Japan
2010 35.4 10.9 6.2 5.7 5.9 14.0 1.5 Past Japan
2011 39.3 9 5.6 7.0 7.2 14.2 1.9
2012 42.8 9 5.1 8.4 8.6 14.4 2.1
2013 46.7 9 4.7 9.9 10.1 14.7 3
2014 50.9 9 4.2 12.1 12.4 15.2 3
2015 55.5 9 3.8 14.6 14.8 15.6 3
2016 60.5 9 3.5 17.3 17.5 16.1 3 Past USA
2017 65.9 8 3.2 20.6 20.8 16.6 3
2018 71.2 8 3 23.7 23.9 17.1 3
2019 76.9 8 3 25.6 25.8 17.6 3
2020 83.0 8 3 27.7 27.9 18.1 3
2021 89.7 8 3 29.9 30.1 18.7 3
2022 96.8 8 3 32.3 32.5 19.2 3
2023 104.6 8 3 34.9 35.2 19.8 3
2024 112.9 8 3 37.6 37.9 20.4 3
2025 122.0 8 3 40.7 41.0 21.0 3
2026 131.7 7 3 43.9 44.2 21.6 3
2027 141.0 7 3 47.0 47.3 22.3 3
2028 150.8 7 3 50.3 50.6 23.0 3
2029 161.4 7 3 53.8 54.1 23.6 3
2030 172.7 7 3 57.6 57.9 24.4 3






China is starting to allow some trade settlement to be done in Yuan in smaller cities.

Seeking Alpha reviews signs that the Chinese economy is reviving.



The historical relationship between China’s manufacturing Purchasing Managers’ Index (PMI) and real GDP growth is shown in the chart. (The Hong Kong PMI is used as a proxy for the Chinese PMI prior to 2004.)

I have just updated the chart for the PMI that rebounded to 52.4% in March 2009 (up from 49.0% the previous month) and the decline in annual GDP growth to 6.1% in the first quarter, down from 6.8% in the fourth quarter of 2008.

Although the GDP data release was disappointing, China’s improving PMI seems to indicate that the country might have seen the worst of the growth statistics.


RELATED
IMF has lowered the forecast for Japan's economy to -6.2% GDP instead of -5.8% GDP in 2009.

The faster shrinking in Japan and higher growth in China is reducing the exchange rate that will be needed for China to pass Japan to be the second largest economy.

blog comments powered by Disqus