DANIEL MOSS: What happens after China becomes the world's biggest economy?
'China’s economy is ascendant and will replace the U.S. as the largest around 2030. We don’t hear much about the next chapter.'
The U.S. economy will grow a bit faster than China.
Huh? That’s not a typo. It’s one of the projections in a fascinating OECD paper sketching scenarios for the world through 2060. Other developments canvassed: China’s share of global output peaks in the 2030s and then declines while India’s slice keeps rising. Indonesia’s economy catches up to its population.
The forecast for the U.S. to outstrip China is not a prediction of any economic miracle in America — just an acknowledgment that China has set itself up for a brutal demographic collapse. Shortly after China overtakes the U.S. economy in size, all the legacies of the one-child policy coalesce as the society seriously ages, stalling out the Middle Kingdom’s expansion. The U.S. will face demographic challenges, too, but nothing like this.
Between 2030 and 2060, this paper projects, gross domestic product in the U.S. will grow at an average of just under 2 percent a year. Not too different from the past decade. China will expand an average of 1.8 percent a year, a smidge behind the U.S., but a vast change from the low double digits we’ve seen in recent decades.
The most important function of the OECD paper, by Yvan Guillemette and David Turner, is that it obliges us to consider what happens after tomorrow.
China’s economy is ascendant and will replace the U.S. as the largest around 2030. We’ve all heard that bandied around, so much that’s not seriously questioned. Then the story tends to stop. We don’t hear much about the next chapter. Kudos to the OECD duo for taking a crack at it.
It’s easy to assume that because China has made such great strides, it’s destined to keep rising. There are echoes in the way people once talked about Japan. History may not be kind to this assumption.
Underpinning the OECD paper is the dominant contemporary narrative that Asia is on the upswing: “One consequence of the rising importance of emerging markets in the world economy, notably China and India, but also Indonesia, is that the centre of gravity of world economic activity continues to move from North America toward Asia.”
America won’t recede into the sunset quietly sipping iced tea. There’s more to economic clout than just raw GDP. We still live in a unipolar financial world with only one currency (the dollar) and one central bank (the Federal Reserve) that really matter.
In time, China and India will get those things, if only to support economies of their projected size. Indonesia is a step or two behind them, but is appropriately mentioned in the same breath.
This forecast for 2060 is not exactly a world of the Big Four. But by then the superpower will have some increasingly super company to rule the global economy.