China to Overtake US by 2027
China is expected to overtake the United States in economic size by 2027 as the world's third-largest economy has benefited from the ongoing global economic crisis, according to a noted global economist.
In the eyes of Jim O'Neil, managing director and head of Goldman Sachs Global Economic Research, the global crisis has only been a blessing for China, accelerating the global power shift from the West to the East. O'Neil, based in London, coined the acronym BRIC to refer to the fast growing developing economies of Brazil, Russia, India and China.
"I think China has had a really good crisis in some ways. It has been good for them, as it forced them to stop being so dependent on exports. I think our 2050 'dream' scenario for BRIC has become more likely, rather than less, since the crisis. The trend growth in Brazil and India seems to be rising also," O'Neil told The Korea Times.
According to a Goldman Sachs report, China will dominate the global economy in 2050 with a GDP of $70 trillion, followed by the U.S., India, Brazil and Russia.
"I think the likelihood of China challenging the number one spot of the U.S. has actually risen, as now China's growth is going to be determined by domestic forces and the rise of consumption, so it is more sustainable," he said.
"On our latest long-term estimates, we think that China might overtake the U.S. by 2027 (in terms of GDP), and with it, the combined GDP of the BRIC countries will become bigger than that of the G7," he added.
The veteran economist forecast that the U.S. financial market and dollar will start losing their dominant positions in the global financial market a decade from now.
"I think the U.S. financial markets will actually remain dominant for another 10 years, including the dollar. But after that, we will move toward a different monetary system where the dollar will share the burden with the yuan and euro," he said.
He expects China, India, Brazil and Germany to emerge as winners in the post-crisis world. "Three of the BRIC countries, especially China, have actually done well in response to the crisis. I think Germany is emerging as a marginal winner," he said. He expects China to have a chance to match the overall influence of the U.S. by 2040.
O'Neil pointed out the rise of China can be both an opportunity and a threat to Korea, suggesting that Korea undertake policy steps to boost productivity and move to higher value added businesses.
"Korea should concentrate on moving up the value-added chain and leave low value-added exports to emerging countries. It would be well placed to benefit more from China and India's emergence," he said.
"But Korea needs to regard itself as a developed economy more. As part of this, it should probably stop intervening in the foreign exchange market as often as it does," he added.