Just a few years ago, expectations were that China would overcome the United States to become the world’s largest economy by the end of this decade.

But the expectations have weakened since 2020 when the COVID pandemic hurt the economy.

China’s economic outlook has darkened, particularly this year, as the communist leaders insisted on their zero tolerance for COVID policy and just relaxed in recent weeks.

Last year, the Japan Center for Economic Research (JCER) forecasted that China and the U.S.—the world’s two largest economies—would switch places in 2033.

But in the latest forecast on December 14, this research center said China’s nominal Gross Domestic Product (GDP) is unlikely to surpass the U.S. in the next few decades.

According to Nikkei Asia, the Japan Center for Economic Research dropped its 2021 forecast, citing China’s economic slowdown due to its stringent “zero-COVID” policy and more substantial U.S. restrictions on Chinese exports.

JCER is a Nikkei-affiliated think tank. It said that in the long term, China would face labor shortages due to its dwindling population, which would drag on its economic growth.

JCER predicts that China’s nominal GDP will equal 87% of the U.S. GDP in 2035.

In its latest forecast, the Japanese think tank envisions a further slowdown in China’s GDP growth to below 3% in the 2030s.

The center lowers its forecast for China’s economic growth to 2.2% in 2035, down 0.8 percentage points from the 2021 estimate.

For the short term, JCER cited two main reasons for its forecast of China’s slowdown.

First is the “zero-COVID” policy. According to the research center, while the Chinese authorities on December 7 announced measures to relax the policy, the number of COVID cases is increasing in many cities. As a result, JCER assumed COVID restrictions, including the curbs on overseas travel, would be lifted in or after 2025.

Many Chinese households remain concerned about their future and keeping a tighter grip on their spending following the repeated lockdowns.

Second is the U.S. restrictions on China’s exports. The U.S. government in October imposed new regulations requiring its exporters to obtain licenses from the Commerce Department to sell advanced semiconductors and other high-technology products to Chinese companies.

In addition, U.S. Republicans are demanding tough actions against China.

These two factors, according to JCER, would slow the pace of productivity gains in China.

In the long term, the population decline would drag on China’s growth.

JCER said: “China will be unable to surpass the U.S. economically, even after 2036.”

Besides JCER, the Centre for Economics and Business Research, a UK think tank, also pared back its forecast for China’s economy. It now believes China’s GDP will surpass the U.S. in 2030, two years later than it previously forecast.

According to World Bank data, China was the world’s second-largest economy at the end of 2021, behind the United States.

Measured in U.S. dollar terms, China’s GDP was 77% of the size of the U.S. in 2021, up from 13% in 2001.

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