China should surpass the US as the world’s largest economy in 2027, says JP Morgan

China should surpass the US as the world’s largest economy in 2027, says JP Morgan
China should surpass the US as the world’s largest economy in 2027, says JP Morgan
Photo: Thomas Peter / Reuters

O gross domestic product (GDP) per capita from China is expected to double in the next decade. This means that almost half a billion Chinese are expected to rise to the middle class and possibly increase their spending on cars, cell phones, financial services, education and health. This is what a study by the JP Morgan bank shows.

According to the survey, it is likely that in 2030, 72% of the Chinese population will be part of the middle class. In Brazil, on the other hand, this number is expected to reach 61%, while in Mexico, it is expected to rise to 79%.

The journey from an emerging middle-income to high-income country is tortuous – which is why China has a plan. “They plan to change the growth engines of the economy. From exports to domestic demand, from investment to consumption, from the manufacturing industry to services, from low added value to high-value technological innovation”, says Gabriela Santos, Global Markets strategist, from JP Morgan, in the report.

With that, the estimate is that China’s GDP will jump from around US $ 15 trillion in 2020 to something around US $ 27 trillion, thus overtaking the United States in leading the global economy. It is not that Joe Biden’s country will stop growing: it is that Chinese growth is much faster. So much so that, in 2028, the country of Xi Jinping should reach the figure of US $ 35 trillion.

While the United States is expected to move from about $ 22 trillion in 2020 to just over $ 30 trillion in 2028.

“China was the only one to have a successful ‘V’ recovery in the world in 2020, during the new coronavirus pandemic, while the United States had a more uncertain growth pattern,” he explains.

The increase in the Chinese economy will also be due to the opening of the market to foreign investors, who can now access the second largest stock market in the world, having traded around US $ 12.2 trillion on the Shenzhen stock exchange.

“China offers greater potential for return than we estimate for developed markets. This comes from the greater growth in revenue, especially from sectors such as consumer goods, technology and health,” continues Santos.

China is also the second largest fixed income market in the world, with yields higher than other countries, such as the United States, Japan and South Korea.

Despite the benefits, Santos warns of some risks in the Chinese market. “It is really crucial for investors to use active management, to avoid the pitfalls and even take advantage of the market volatility and inefficiencies that arise along the way,” he says.

Anyway, for JP Morgan, it is worth paying attention: the next decade must be dominated by China – and in the economics chess game, the United States can prepare for a checkmate.

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