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China will become the world's largest economy

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The International Monetary Fund has predicted that China, the largest of the BRICs, will displace the US as the world's leading economy by 2030

China will become the world's largest economy

According to estimates of the International Monetary Fund (IMF) published in July of this year, the Asian giant will surpass the United States as the largest economy in the world by 2030. This projection would be achieved independently of the fact that its growth rate is lower than that reached in the last 18 years where it came to register rates higher than 10% per year.

Leer en español: China llegará a ser la mayor economía del mundo

China the global factory

After the implementation of a series of economic reforms aimed at opening trade, China has managed to become the second largest economy in the world in just a few decades, mainly because it has the most abundant reservoir of cheap labor on the planet, surpassing to countries with a high and unquestionable scientific and technological development such as Germany, Japan, and France; transforming itself in consequence into a real machine to suck capital from all latitudes, thus pushing its impressive economic growth.

For the year 1990 the gross domestic product (GDP) of China was 360 billion dollars and represented 5% of the GDP per capita of the USA, almost three decades later in 2018 the GDP amounted to 12 billion dollars which means almost 30% of the GDP per capita in the United States. This abysmal rhythm of growth sustained by economic opening and low labor costs will continue in the next decade and it is expected that by the year 2030, China's GDP will rise to 26 trillion dollars and will become the first economy worldwide. surpassing the US whose GDP will also grow but at a lower rate reaching 25.2 trillion dollars.

US-China trade war

The estimate made by the IMF, shared by the British bank HSBC Holdings Plc, is in contrast with the recent statements of the president of the United States, Donald Trump, who argues that China is no longer on the path that would lead it to overcome his country in a few years. In addition to this, in the framework of the commercial war that has been developing this year, Trump has threatened to impose tariffs in the order of 500 billion dollars, a figure that is equivalent to the total of US imports from the Asian country.

Read also: Is the truce between China and the United States over?

This strategy of the White House is a clear attempt to stop the growing Chinese trade deficit that has dragged on for several years. In the year 2000, the balance between exports and imports was -84 billion dollars, while for 2018 the deficit reached 344 billion dollars. This commercial relationship that seems to be harmful to the US and beneficial to China should not be understood in isolation and it should be remembered that the largest holders of US treasury bonds are precisely Asians, so that rather than enemies, they would be two partners in conflict but they need each other.

China is not the only one

On the other hand, not only China will be a country with greater preponderance within the global economic ranking. India will displace Japan from third place, confirming the projection of Goldman Sachs a few years ago when it described the rise of the BRICs. Pakistan and Bangladesh, Southeast Asian countries, will also rise to important positions in that ranking, and Africa's population boom will create investment opportunities. In summary, 70% of world growth by 2030 will come from the so-called emerging countries, but not due to technological development and productivity but thanks to a large and growing population of young workers.

 

LatinAmerican Post | Luis Alberto Lozada

Translated from "China llegará a ser la mayor economía del mundo"

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