PwC: China to become world’s largest economy by 2050

A new report by PricewaterhouseCoopers (PwC) suggests China could be the largest economy in the world and account for 20 percent of global GDP by 2050.

The research by the "Big Four" auditor forecasts that the US and Europe will steadily lose ground to China and India over the coming decades.

In fact, China might achieve the status of being the largest world economy much sooner than 2050. The PwC report projects China could overtake the US to take first place before 2030 on Market Exchange Rate (MER) terms.

GDP at MER provides a better measure of the value of goods and services produced in an economy, and converts a country's GDP in national currencies to US dollars based on current market exchange rates.

Projected growth paths of China and the US between 2016 and 2050. [Graphic / PwC]

The report says that the world economy will double in size by 2042, driven by emerging markets and developing countries.

"The E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of almost 3.5 percent over the next 34 years, compared to just 1.6 percent for the advanced G7 nations of Canada, France, Germany, Italy, Japan, the UK and the US."

The shift of global economic power towards the emerging economies will largely be driven by China and India, the report says.

The trend of having fixed investment as a key driver to China's economic growth is likely to continue in the coming years, it says, as urbanization and government initiatives roll in, notably the Belt and Road Initiative, Beijing-Tianjin-Hebei cluster and Yangtze River Economic Belt.

According to the International Monetary Fund, the Chinese economy currently accounts for 17.3 percent of global GDP (measured on a purchasing-power-parity basis).

The first edition of the PwC report was published in March 2006, and included 17 leading economies. The latest edition features 32 countries, and includes projections for potential GDP growth and the world economic order.

"Looking ahead, China still has great potential for growth. Its urbanisation process is still at a relatively early stage, and its services sector has a lot of scope to catch up with economies like the US in terms of quality, sophistication and business range, in particular as regards producer services such as logistics, information, financing and commercial services. Reform of state-owned enterprises, if properly handled, could shatter monopolies and create new business opportunities worth trillions of dollars," says Allan Zhang, chief economist at PwC China/Hong Kong.