China’s GDP is expected to catch up with that of the United States in 2030, two years earlier than originally expected, said credit insurance company Euler Hermes, foreseeing that the COVID-19 crisis could accelerate the shift of the world’s economic balance eastward to Asia.
China’s fourth quarter economic growth in 2020 rebounded to a pre-epidemic level, boosting its full-year expansion to 2.3 percent. The annual growth makes China the only major economy in the world to have avoided a contraction last year as other countries still grapple with the pandemic and its fallout, according to Reuters.
“Looking ahead, with the Asia-Pacific region set to recover sooner from the COVID-19 crisis, the pace of this movement could be 1.4 times faster than previously expected,” according to a report by Euler Hermes, a subsidiary of Munich-based multinational financial services company Allianz.
The steady performance of the Chinese economy and fewer scarring effects pave the way for it to be positioned as a relative winner in the post COVID-19 world, the firm added.
“More specifically, we now expect China’s GDP to match that of the U.S. in 2030, instead of in 2032 based on our forecasts before the COVID-19 crisis,” Euler Hermes said.
Ratio of China-to-U.S. nominal GDPs, pre and post COVID-19 crisis
Japan-based financial services group Nomura Holdings is even more positive about China’s fast economic growth. The firm had estimated that China’s economy would surpass that of the U.S. in 2030, but in light of the latest economic data, it brought forward its forecast to 2028 by extrapolating the International Monetary Fund projections.
Despite being hit by the pandemic, investment inflows to China grew against the trend at a time when global multinational investment sharply fell.
“Beijing is expected to remain a strong choice for foreign investors, particularly as the nation’s capital is predicted to see more signs of recovery sooner than most other major markets overseas,” said Michael Wang, senior director of capital markets for JLL North China.
China has relaxed restrictions on foreign investment over the last few years, as the country’s rapid economic growth and massive consumption potential have attracted international consumer brands, automakers and financial institutions.
Foreign direct investment into the Chinese mainland, in actual use, expanded 6.2 percent year on year to a record high of 999.98 billion yuan ($150 billion) in 2020, the Ministry of Commerce said on Wednesday.
Looking ahead, Euler Hermes expected that the world’s second-largest economy would grow by 8.4 percent in 2021, compared with 4.6 percent for the global economy. A Reuters poll earlier expected China’s economy would expand at the same pace.