The possibility that China will overtake the United States as the world’s biggest economy is declining as the country faces an obvious slowdown, according to Cornell professor and former International Monetary Fund (IMF) official Eswar Prasad.
In a recent interview with Nikkei, Prasad said that the economies of the two countries—currently the first and second biggest economies in the world—have taken opposite trajectories, with the U.S. likely to maintain its growth while China continues facing structural problems like high public debt and low birth rate.
“China faces a variety of fragilities, including undesirable demographics, a collapsing real estate market, deteriorating investor sentiment at home and abroad and the lack of clarity over a new growth model,” Prasad said.
“Even a 4 to 5 percent growth rate will be difficult to sustain over the next few years. The likelihood of the prediction that China’s GDP will one day overtake that of the U.S. is declining.”
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While inflation soared immediately after the COVID-19 pandemic in the U.S., raising the cost of living and fueling fears of an incoming recession, the country’s economy proved resilient to the challenges of the past few years. In the last quarter of 2023, the U.S. grew at a 3.3 percent rate, defeating expectations, and the country added more than 350,000 jobs.
China, on the other hand, had a very bumpy post-pandemic recovery due to a combination of factors that originated beyond the pandemic, including its aging workforce, slower internal demand, and an ongoing crisis in the real estate sector, which had been driving the country’s explosive growth in the past few decades.
This is a developing story and will be updated when more information is available.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
