According to Apollo News, the Chinese government believes that the United States is in decline. However, a new report from the Japan Center for Economic Research (JCER) predicts that China’s economy will not surpass that of the United States before 2035.
According to the Japanese think tank, the United States will maintain an economic advantage over China, with GDP topping $41 trillion in 2035. The GDP of China will be close to $36 trillion.
The reasons include China’s COVID-19 zeroing policy and the global reaction to it.
Regarding the zero-COVID policy, China’s real GDP growth rate is expected to be less than 2% due to the decline in the labor force. Therefore, it is difficult for the country to overtake the United States even later.
According to Apollo News, the labor shortage caused by China’s shrinking population will act as a headwind to its economic growth in the long run.Furthermore, the risk scenarios assume that the Xi Jingping administration will be re-elected for a fourth term.
Following the repeated lockdowns, many Chinese households are still uncertain about their future and have tightened their spending controls.
Karl Shen and Jenny Huang, two representatives from Fitch Ratings, shared their opinions on Nikkei Asia in October. They both agreed that the shopping habits of Chinese consumers have changed significantly. As a result, it will be challenging to return to normal even after COVID curbs are lifted.
The second reason is the increased limits on U.S. exports to China.
According to Apollo News, the Biden administration imposed new export control procedures that required exporters to get a Commerce Department license when exporting high-end semiconductors and other high-tech products to Chinese enterprises.
The Japanese analysis anticipates that tighter IT restrictions for Chinese enterprises, growing concerns about contingencies in Taiwan, and mild zeroing policies will continually affect labor, capital, and total factor productivity (TFP).
According to the report, China’s real growth rate will decline to 1% as the U.S.-China tech war intensifies. Moreover, the country will lose 18 trillion dollars over the next decade. It’s equivalent to the country’s nominal GDP in the 2021 period.