China dealt crushing blow as economy now may NEVER overtake US
WATCH NOW: A major driver behind China's population decline was the rapid lifting of Covid restrictions
China may never surpass the US to become the world’s largest economy, a leading investment bank has claimed.
Nathan Sheets, a global chief economist at Citi cited China’s soaring debt levels, its ageing population, and its property crisis, as factors that would hinder it from knocking America off the top spot.
He said it was no longer “inevitable” that China’s economy would surpass the US, stating that it would not happen “until 2080”.
The Wall Street economist said that China’s economy has shrunk drastically in the last two years.
A global chief economist cited China’s soaring debt levels, its ageing population, and its property crisis, as factors
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In 2021, China’s economy was equivalent to 75 per cent of America’s GDP, whereas now, it has fallen to 65 per cent.
Sheets said: “Challenges loom from high-debt levels, stresses in the property sector, ageing demographics, and geopolitical headwinds.
“The government has responded by seeking to foster advanced manufacturing, high-tech production, and green infrastructure. But whether this push will be sufficient is an open question.”
A year ago, Citi Bank said that China would overtake the US’s economy in the 2030s, but now deems the 2040s as more likely.
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Sheets said that China may even have to wait until 2080 to take America’s crown, adding: “We now believe that Chinese overtaking is ‘likely’ but we no longer see it as ‘inevitable’.”
Speculation as to whether Beijing could overtake Washington has been going on for decades. In 2003, Goldman Sachs guessed that China could surpass the US by 2041.
However, Covid restrictions lasting for three years battered the country’s economy, as Xi Jinping pushed for zero-Covid.
The country's stock market did see an initial jump when restrictions were lifted. However, the bounce was not maintained, and the economy continued to underperform.
China's economy is facing a downturn in 2024 following the pandemic which the country never bounced back fromGETTYLast week, Jinping announced a £220billion project to save the economy, after the Chinese stock market plummeted to a five-year low.
China's CSI 300 Index has lost a fifth of its value over the last nine months reaching its lowest level since the start of 2019 this week. Meanwhile, the NASDAQ Golden Dragon China Index also falling for a sixth day in a row.
Low confidence from investors began back in 2021 when property giant Evergrande collapsed. Chinese Premier Li Qiang held a meeting with the cabinet last week in a plan to boost the investment value of listed companies, reports Bloomberg.
The report said Chinese authorities were considering mobilising about two trillion yuan (approximately £220billion) to stabilise a slumping stock market.
China is also facing a demographic crisis as its birth rate plummets and working-age population shrinks. The country's population dropped by two million last year and more than a fifth of its population is now aged 60 or over.