China’s Share Of Global Economy Set To Stall- New Research

Chinese premier Xi Jin ping might have cemented his power in China, but dreams of dominating the global economy could soon come to a screeching halt.

Over the last half century the Chinese economy has transformed from a beleaguered struggling emerging market into a global power house, with high growth year after year after year, sometimes double-digit increases.

But that economic surge is coming to a halt and by 2030 China’s annual growth will drop to a paltry 2%, similar to the U.S., according to a recent report from London-based financial consulting firm Capital Economics.

“The China-led bloc’s weight in the global economy will noit increase substantially further,” states the report titled The Fracturing of the Global Economy — An Introduction. More precisely, by 2050 China and its allies will likely constitute 23% of the global economy while the U.S. and its allies will be responsible for 45%, the report states.

The reason for this is what Capital Economics calls the Fracturing of the economy. From 2000 through 2019 globalization spread and the world, especially China and the U.S., prospered. But over the last couple of years that year-in-year-out expansion is trade got derailed.

The global system of trade likely won’t collapse entirely, the Capital report suggests. Instead, the most probably outcome is that it will split or fragment. “We think the world economy will coalesce into two blocs centered on the U.S. and on China,” the report states. That fracturing will likely happen due to governments without input from industry.

This fracturing process will likely shave a fraction of productivity growth and add i sliver of extra inflation, the report states. That will likely have a small impact.

But the big takeaway is that China’s seemingly never ending growth and increased power relative to the west will stop.

China and its allies plus those countries that lean toward China accounted for 10% of world economic output in 1990 compared to 26% in 2021. By 2050 the same bloc will reach 28% of the world total.

At least part of the issue is China’s productivity growth will likely take a hit due the fracturing . “The China-led bloc is dominated by China itself, making adaption harder and therefore increasing the potential economic hit,” the report states. When you add in lower productivity growth plus a shrinking population in China, there’s an obvious reason why China’s economy will stall.

Contrast the share of China (plus allies/friends) with the U.S., its allies and those which lean towards the U.S. That American bloc’s share will measure 65% in 2050 compared to 86% in 1990.

Yes the U.S. (and its friends) share has fallen but China may have maxed out its portion, the report suggests.