BEIJING -- It's a milestone heralding a long-expected pivotal shift in the global balance of power: China passing the U.S. as the world's largest economy. But thanks to its success against the coronavirus pandemic, that year may arrive much quicker than thought, perhaps in 2028.
China has more or less succeeded in containing COVID-19 and has turned its focus back to economic growth, while the U.S. and many other developed countries still struggle to bring the disease under control. Experts believe that China's head start could have a long-term impact on the global economic order and strengthen its standing in a post-coronavirus world.
Chinese gross domestic product grew a real 6.5% on the year for the October-December quarter, the National Bureau of Statistics announced Monday. Full-year growth for 2020 came to 2.3% -- China's worst in 44 years but the only positive showing among the world's leading economies.
China's recovery from the coronavirus is only expected to accelerate in 2021, with the government, the World Bank and the International Monetary Fund all expecting GDP growth of 8% or so.
The Japan Center for Economic Research said in December that China could overtake the U.S. as early as 2028 should the economic impact of COVID-19 linger.
The center had previously not expected a reversal before 2036, but it now sees China and the U.S. facing sharply diverging outlooks on employment and research and development spending.
The U.K.-based Center for Economics and Business Research also moved up its forecast for China overtaking the U.S. by five years to 2028 in a key report published in December. By 2023, the CEBR sees China joining the ranks of high-income economies -- which the World Bank defines as having gross national income of $12,536 or more per capita.
Despite limited flare-ups of late, China has contained COVID-19 better overall than the U.S., Japan and Europe have. Its early success has allowed the country to return its attention to the economy and future growth.
Protracted lockdowns and other restrictive measures to help curb the virus can lead to an increase in unemployment payments and other government spending. Such economies as the U.S., Japan and Europe could suffer a long-term blow to competitiveness if coronavirus relief eats into science and technology investment.
China is also ahead of other major economies in normalizing fiscal and monetary policy, since it did not have to tap quantitative easing and negative interest rates in response to the pandemic.
China's growing economic clout is forcing countries in Asia and beyond to reevaluate ties to Beijing. Under outgoing President Donald Trump, Washington imposed a series of tariffs and export restrictions as part of its trade and technological rivalry with Beijing.
But in November, China signed the Regional Comprehensive Economic Partnership, the world's largest trade agreement, with 14 other countries, including Japan, Australia and India. In December, China reached an investment agreement with the European Union.
"Although Indo-Pacific states seek U.S. help to preserve their autonomy in the face of China's rise, they realize it is neither practical nor profitable to exclude Beijing from Asia's vibrant future," wrote Kurt Campbell, tapped as coordinator for Indo-Pacific affairs on the National Security Council under incoming U.S. President Joe Biden, in a recent piece for Foreign Affairs magazine with Brookings Institution scholar Rush Doshi.
"Nor do the region's states want to be forced to 'choose' between the two superpowers," they continued. Campbell and Doshi advocated for "a place for Beijing in the regional order" and "Chinese membership in the order's primary institutions."