The Centre for Economics and Business Research (CEBR) on Saturday said that China will overtake the United States to become the world's biggest economy in 2028.
This is five years earlier than previously estimated due to the contrasting recoveries of the two countries from the COVID-19 pandemic, the think tank said in an annual report published on Saturday.
"For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China. The COVID-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China's favour," the report added.
China is expected to report average economic growth of 5.7 per cent a year from 2021-25 before slowing to 4.5 per cent a year from 2026-30. Whereas, the United States which was likely to have a strong post-pandemic rebound in 2021, is expected to report slow growth of 1.9 per cent a year between 2022 and 2024, and then to 1.6 per cent after that.
The CEBR said China's "skilful management of the pandemic", with its strict early lockdown, and hits to long-term growth in the West meant China's relative economic performance had improved.
Japan would remain the world's third-biggest economy, in dollar terms, until the early 2030s when it would be overtaken by India, pushing Germany down from fourth to fifth. The United Kingdom, currently the fifth-biggest economy by the CEBR's measure, would slip to sixth place from 2024.
Europe accounted for 19 per cent of output in the top 10 global economies in 2020 but that will fall to 12 per cent by 2035, or lower if there is an acrimonious split between the EU and Britain, the CEBR said.
"We see an economic cycle with rising interest rates in the mid-2020s," it said, posing a challenge for governments which have borrowed massively to fund their response to the COVID-19 crisis.
“The underlying trends that have been accelerated by this point will result to a greener and more tech-based world as we move into the 2030s," CEBR said.