Analysts from the Centre for Economics and Business Research (CEBR) published the findings of its study which claim China would become the world’s largest economy by 2032 relegating the United States to second place.
Another surprising disclosure by the report is that India will rank third; surpassing France and the United Kingdom. Japan, Germany and Brazil will come in fourth, fifth and sixth respectively.
The report states that more affordable energy and technology prices will shift economic expansion activities toward the Asia Pacific over the next 10 to 15 years. Among the biggest beneficiaries would be South Korea and Indonesia. Both economies are expected to break into the top 10 largest economies at eighth and tenth respectively.
The study took into account the growth of China’s manufacturing sector which is expected to give its economy a massive boost in the international community in the next 15 years.
Over the last five years, President Xi Jinping had been promoting his legacy defining project, “One Belt One Road” initiative or “The New Silk Road”. President Xi plans to invest trillions of U.S. dollars to build trading pathways and infrastructure throughout Asia, the Pacific, Europe and Africa. To date, 68 countries have signed up for the initiative.
As a by-product of offshoring and outsourcing activities the past 15 years, high- tech manufacturing and financial services sectors are growing at an accelerated pace in Asia which has made the region economically more prosperous.
However there are factors that could potentially hinder the continued growth of the Asia-Pacific region.
First, the United States’ decision to tighten controls on Intellectual Property rights plus the Trump administration’s crackdown on offshoring and outsourcing activities could have an inflationary effect on the price of technology as well as dampen the growth of the Asian economies.
For decades, U.S. companies have offshored and outsourced services to their counterparts in Asia which could develop products at a lower cost. Eventually, these economies were able to use the technology to build variations that they could sell at the world market at cheaper prices. China and India were the biggest beneficiaries.
Second, China’s rising corporate and provincial debt and shifting patterns in the global trading of manufactured goods could affect South Korea and Indonesia which are predominantly exporting countries.
But CEBR analysts believe the current trends in the global economy are strong enough and can weather any adverse change in international trading conditions.
Oliver Kolodseike, CEBR Senior Economist believes that the study confirms a significant shift in the balance of power in the global economy:
“The interesting trend emerging is that by 2032, five of the 10 largest economies will be in Asia while European economies are falling down the ranking and the USA loses its top spot. Technology and urbanization will be important factors transforming the world economy over the next 15 years.”