China’s Economy Catches Up But Does Not Surpass the USA (Yet)

In the future, China's economy will still be one of the fastest growing economies in the world. China's share of the global gross domestic product (GDP) will continue to grow in the next ten years. The USA's share, on the other hand, will decrease. In ten years, however, the USA will still be more important for the global GDP than China. These are the findings of a survey conducted at the Centre for European Economic Research (ZEW) among 249 financial market experts.

In the last three decades, China’s economy grew nine percent on average. In the boom years, growth rates of 13 percent were realised. Moreover, China significantly contributes to the global GDP. At the moment, China’s share of the global GDP is at about five percent. According to the vast majority of survey participants (about 55 percent) China will double its share to ten percent in the future. About 33 percent of experts expect a future share of 15 percent.

The majority of survey participants expect the USA’s contribution to the global GDP to decrease. Currently the USA’s share of the global GDP is at about 27 percent. 54 percent of experts expect a decrease to 20 percent in the next ten years. Sandra Schmidt, ZEW researcher responsible for the study, says: "The financial market experts mostly agree that the economic impact of the USA will decline in the future. However, the majority of survey participants still expect the USA to contribute more to the global GDP than China. At least this is the case for the next ten years."

China has built huge foreign currency reserves over the last years to keep the Yuan competitive. About 80 percent of survey participants expect China’s foreign currency reserves to continue to grow in the next five years, even though the growth may be slower than before. US dollars currently make up about 70 percent of China’s foreign currency reserves. 89 percent of survey participants expect that China will reduce this percentage in the next five years. 36 percent of experts expect that the US dollar will then make up 50 percent of China’s foreign currency reserves. About 31 percent of survey participants expect it to be 40 percent.

Against the background of the Chinese central bank’s efforts to enforce their currency internationally, the survey participants were asked about basic problems which get in the way of general acceptance of the Yuan. About 84 percent of survey participants consider the political stability and China’s degree of openness problematic in this context. 67 percent also see the structure of the capital market in China as a problem. By comparison, experts consider an unsteady economic growth in China not that problematic.

For further information please contact

Dr. Sandra Schmidt, E-mail: s.schmidt@zew.de