News Center



Home News Center News

Prof. Lu Feng: Can Chinese Economy Overtake American One?

Jan 17-2024   



Since a 2003 Goldman Sachs report predicted that the Chinese economy would overtake its American counterpart and become the world’s largest by 2041, widely divergent views on the topic have cropped up. In a recent commentary, Prof. Lu Feng of the NSD said that despite a slowdown in its catch-up, China can still unleash its economic potential to close the gap.

 

What is being compared is the economic volumes of the two countries, usually gauged through purchasing power parity (PPP) or exchange rates. In November 2023, a widely circulated report showed that of 35 economists and China experts of Chinese, American, British and other nationalities, 15 agreed or strongly agreed that the Chinese economy would overtake the American one chiefly because China as a developing country has higher potential growth rate and its population is four times that of the US; 13 disagreed, citing China’s declining fertility rate, an ageing population, low efficiency in financial system, explicit and implicit debts, and a lack of reform momentum; 7 were neutral.

 

Shifts in predicted catch-up time could be due to new hawkish views in the US which exaggerate China’s economic difficulty and magnify systemic divergence between Chinese and American interests, said Prof. Lu. It can also be observed that China did slow down the pace in narrowing the gap with the US. Its GDP surged from 12.6% of America’s in 2001 to about 60% in 2014. Due to changes in internal and external environments, particularly the Covid-19 pandemic, the speed decreased and in certain years went into negative territory. As a result, the proportion rose slightly in the subsequent years, to around 66% in 2023.

 

Prof. Lu believed that the Chinese economy still grows faster than its American counterpart by about 3% annually, which provides a solid foundation for it to shrink the gap. As the American economy slows down and its inflationary expectations weaken, the US Federal Reserve is entering a new round of rate cutting, which will bring down dollar indices from their plateau. Meanwhile, the Chinese economy continues to recover, thus resuming the trajectory to catch up.

 

China has performed very well on the supply side, said Prof. Lu. To boost economic growth, it should focus on tackling such issues as insufficient domestic demand, weakening inflation, and lack of market confidence.

 

Prof. Lu Feng: Can Chinese Economy Overtake American One?

Jan 17-2024   



Since a 2003 Goldman Sachs report predicted that the Chinese economy would overtake its American counterpart and become the world’s largest by 2041, widely divergent views on the topic have cropped up. In a recent commentary, Prof. Lu Feng of the NSD said that despite a slowdown in its catch-up, China can still unleash its economic potential to close the gap.

 

What is being compared is the economic volumes of the two countries, usually gauged through purchasing power parity (PPP) or exchange rates. In November 2023, a widely circulated report showed that of 35 economists and China experts of Chinese, American, British and other nationalities, 15 agreed or strongly agreed that the Chinese economy would overtake the American one chiefly because China as a developing country has higher potential growth rate and its population is four times that of the US; 13 disagreed, citing China’s declining fertility rate, an ageing population, low efficiency in financial system, explicit and implicit debts, and a lack of reform momentum; 7 were neutral.

 

Shifts in predicted catch-up time could be due to new hawkish views in the US which exaggerate China’s economic difficulty and magnify systemic divergence between Chinese and American interests, said Prof. Lu. It can also be observed that China did slow down the pace in narrowing the gap with the US. Its GDP surged from 12.6% of America’s in 2001 to about 60% in 2014. Due to changes in internal and external environments, particularly the Covid-19 pandemic, the speed decreased and in certain years went into negative territory. As a result, the proportion rose slightly in the subsequent years, to around 66% in 2023.

 

Prof. Lu believed that the Chinese economy still grows faster than its American counterpart by about 3% annually, which provides a solid foundation for it to shrink the gap. As the American economy slows down and its inflationary expectations weaken, the US Federal Reserve is entering a new round of rate cutting, which will bring down dollar indices from their plateau. Meanwhile, the Chinese economy continues to recover, thus resuming the trajectory to catch up.

 

China has performed very well on the supply side, said Prof. Lu. To boost economic growth, it should focus on tackling such issues as insufficient domestic demand, weakening inflation, and lack of market confidence.