You must wait for the economy’s biggest surprise: the US will grow more than China for the first time since 1976

sorpasso China to the United States will have to wait. For the first time since 1976, the US economy will grow higher than that of the Asian giant this year. The impact of the coronavirus and the way the subsequent outbreaks were managed has broken the trend that China was on track to become the world’s number one economic power this decade. Some analysts believe that the overshoot will not happen anymore.

China, the world’s second largest economy, will grow by about 2% this year, according to forecasts by Bloomberg Economics, below the 2.8% growth rate in the United States. If forecasts come true for the first time since 1976, China’s GDP will grow at a lower rate than the United States. It is the first company to predict this circumstance this year. The IMF has not yet considered its April forecast in this scenario when estimating growth of 3.7% for the US and 4.4% for China..

But a month ago, it was very difficult to assess the impact of the genetic zero of the Chinese authorities on the economy. Bloomberg Economics includes this cap in its new perspective, leaving China’s GDP below the growth recorded in 2020, with the coronavirus outbreak and wild restrictions.

Bloomberg Economics’ forecast represents a sharp drop in the consensus of experts, who expect China to continue to grow at a 4% rate. The US, whose economy is threatening stagflation and with the Federal Reserve accelerating its monetary policy tightening, is not helping to make accurate forecasts between now and the end of the year.

Already at the end of last year, Bank of America predicted that the United States would defeat China in 2022. The bad omens for China were based on the outbreak of the real estate crisis, led by Evergrande, and the growth of regulatory pressures on the technology sector. At the end of last year, no one believed that the outbreak would bring the second largest economy on the planet under control again. This would be the first time the nation has significantly missed the annual target since the five-year goal-setting practice was adopted in the 1990s.

This year’s target is “about 5.5%”, the lowest level ever set and set before the latest wave of lockdowns in Shanghai, which devastated consumption. Some economists estimate that China’s GDP contracted in the second quarter due to lower retail sales and industrial production data.

Since 1976, since China abandoned the Cultural Revolution, the Asian giant has worked to reduce its GDP gap with the United States. International Monetary Fund forecasts indicate that the Asian giant can make its progress in 2030. The Center for Economic and Business Research (CEBR, for its English acronym) has predicted that sorpasso will be introduced to 2028ironically, to manage the epidemic.

For its part, the United States faces the inflationary specters of the 1970s. Both countries are trying to move quickly in the face of economic reality. Beijing has got its fiscal and monetary mechanism working again to prevent its economy from slowing down. Today, it cut interest on real estate loans precisely to stimulate the growth of the real estate sector.

US President Joe Biden is promoting a legislative package to boost US competitiveness against China. Much of his economic agenda rests on the idea that democracies can have a stronger economy than an authoritarian model like China.

For Simon McAdam, an economist at Capital Economics, the disaster for the Chinese economy that began last year is only a preview of what’s to come. The company does not expect China to overtake the United States as the world’s largest economy, neither in the medium or long term. Private sector investment in China will slow further in the coming years and suffer from a shrinking workforce. Attempts to increase the birth rate have failed, labor force participation rates are already high, and the Asian giant is too large to depend on immigration to any significant degree. This is why the trend growth rate in China will slow to around 2% as of 2030, to no surprise.

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