The Asian giant faces a host of difficulties, some of which are self-inflicted. These will delay the moment it overtakes America economy—and a growing number of economists think that may not happen at all
of previously booming sectors, such as tech and education, has also depressed the mood. China’s economy expanded by an impressive 8.1% in 2021, but it will be lucky to grow by even 3% this year.
In the longer term, China’s ageing population will mean further difficulties. The workforce could shrink by 15% over the next 15 years, according to some estimates. Capital Economics, a consultancy, thinks China’s GDP might draw close to America’s or even surpass it by the mid-2030s only to fall behind again as its demographic decline asserts itself.
One of the hardest and most neglected questions in this debate is what will happen to the exchange rate between the two countries and to prices within them. Goods and services in China are still substantially cheaper than in America on average. If China does continue to narrow the productivity gap with America, its prices should also converge, either through a stronger currency or faster inflation. These movements can make a big difference.
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