Could China’s GDP Reach $123 trillion by 2040?
The Nobel prize winning economist Robert Fogel believes the answer is yes. To put this number in perspective his forecast is that China’s GDP will be about 3 times the size of US GDP by 2040.
He estimates that China will account for 40% of world GDP, the US will account for 14%, India will account for 12%, the European Union will account for 5%, and Japan will account for 2%.
As a point of comparison he provides data on world GDP in 2000, when the US accounted for 22% of world GDP, the EU 21%, China 11%, Japan 8%, and India, 5%.
Essentially, these numbers reflect estimates based on the projected low population growth in the West, especially Europe, the potential returns to expansion of education in China, increasing labor productivity in China, and a continued shift in employment away from agricultural jobs towards industry and service jobs in China.
Of course, it is incredibly difficult to forecast macroeconomic variables, especially over a 40 year horizon, and I’m sure Fogel would tell you there is a large potential for variance from his estimate. On the other hand, when an economist as renowned as Fogel makes a prediction like this, it is definitely an argument worth considering. Furthermore, even if his estimates are substantially off, these figures still suggest that China will constitute a large part of the global economy in the not so distant future. $123 trillion is a huge number for GDP, but Fogel’s estimates are compelling and don’t seem unreasonable as you read this paper.
Now Fogel still predicts that US per-capita GDP will exceed China’s per-capita GDP by about 25%, so the US is likely to retain much of its economic status. But whether Fogel’s estimates come to fruition or not, China is very likely to be the major economic story of the next half-century. I still owe Red and Sam direct responses to their comments on China, but I wanted to do this post first to make a larger point about US policy towards China. I think it is a huge mistake both in the short- and long-term to take a high-handed approach with China. The stability of the world economy will in large part depend on cooperation between the US and China.