China, India to Overtake U.S. Economy by 2050
A new report predicts China will become the world’s largest economy in the next few decades, with significant growth also expected in India.
Though the size of the global economy is expected to more than double by 2050, a new report from PricewaterhouseCoopers suggests America will no longer be king of the hill a few decades from now.
That title instead will go to China, which currently plays second fiddle to the U.S. in terms of gross domestic product but which is expected to overtake the American economy by 2030.
But if PwC’s projections play out, the U.S. won’t even lock down a silver medal a few decades from now. On a purchasing-power-parity basis – which looks at GDP adjusted for international exchange rates and costs associated with local purchases – India will come in second to China, with the U.S. rounding out the top three.
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“After a year of major political shocks with the Brexit vote and the election of President [Donald] Trump, it might seem brave to opine on economic prospects for 2017, let alone 2050,” John Hawksworth, chief economist at PwC U.K., said in a statement Thursday accompanying the report. “By 2050 we project China will be the largest economy in the world by a significant margin, while India could have edged past the US into second place and Indonesia have risen to fourth place.”
GDP purchasing-power-parity calculations aren’t the gold standard for most U.S. macroeconomists but offer an alternative look at economic growth focused on, as the name suggests, a particular country’s purchasing power.
And on a PPP basis, the largest economies in the world in 2050 are not expected to include 2016’s usual cast of characters. Indonesia is expected to jump from the world’s eighth-largest economy to the fourth-largest, with Brazil climbing from seventh to fifth. Japan, meanwhile, could fall from fourth to eighth, Germany from fifth to ninth and the U.K. from ninth to 10th. France is expected to drop out of the top 10 entirely.
The report points to an expected shift “away from established advanced economies, especially those in Europe, towards emerging economies in Asia and elsewhere.” It predicts Brazil, China, Indonesia, Mexico, Russia and Turkey will see average annual economic growth hit nearly 3.5 percent over the next three decades and change.
FILE – In this Thursday, Aug. 18, 2016 file photo, a Union Jack flag and a European flag blow in the wind in front of the city hall in London. To kick off the formal process of pulling out of the bloc, Prime Minister Theresa May will have to trigger Article 50 of the EU Treaty, which will give both sides up to two years to agree to the terms of the divorce. May has said that she will start the process by the end of March – meaning that Britain can expect to be out of the EU by mid-2019. But many uncertainties about the withdrawal process remain because Article 50 has never been used before. (AP Photo/Frank Augstein, file)
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That’s more than double the rate of growth expected out of Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
“This shift of global economic power towards the emerging economies will largely be driven by China and India. China is already the largest economy in the world in PPP terms, having overtaken the US in 2014,” the report said. “For the advanced economies, growth is projected to be much lower on average compared to the emerging economies between 2016 and 2050.”
Largest GDP-PPP in 2050
PwC couches its report by saying these results are what “could” happen rather than what “will” happen, noting that the world is “entering a period of considerable political, social and economic uncertainty.”
Among contributing factors to this uncertainty, PwC highlights Trump’s election, saying that it will be “critical to see what policies the new U.S. administration” pursues.
“Of course, we should not dismiss political shocks like Trump or Brexit to the extent they point to deeper structural shifts, notably a populist backlash against globalisation, automation and the perceived impact of these trends in increasing income inequality and weakening social cohesion,” Hawksworth said. “These trends pose real policy challenges across the developed world and beyond and … there is no silver bullet to address these concerns.”