China's Economy to Surpass US by 2035

China's economy will overtake that of the US by 2035 and be twice its size by mid-century, a new study by a US research organization concludes.

China’s likely continued success will eventually bring an end to America’s global economic preeminence, requiring strategic reassessment by all major economies - especially the United States, the European Union, Japan, and even China itself.

In China's Economic Rise - Fact and Fiction, economist Albert Keidel of the Carnegie Endowment for International Peace, said China's rapid growth is driven by domestic demand more than exports, which will be sustainable over the coming decades.

'China's economic performance clearly is no flash in the pan,' Keidel writes. 'Its growth this decade has averaged more than 10% a year and is still going strong in the first half of 2008. Because its success in recent decades has not been export-led but driven by domestic demand, its rapid growth can continue well into the 21st century, unfettered by world market limitation.'

Keidel, who has worked as a World Bank economist and US Treasury official, said the rise of China to the world's biggest economy will happen regardless of the method of calculation.

Under current market-based estimates, China's gross domestic product is about $3 trillion compared to $14 trillion for the US. Based on purchasing power parity (PPP) measure used by the World Bank and others to correct low labour-cost distortions, he said China's GDP is roughly half of that of the US.

Keidel's calculations suggest that using the PPP method, China will catch up with the US as an economic power by 2020, with an equivalent GDP of $18 trillion. Based on the more commonly accepted market method, the turning point will come by 2035. By 2050, he estimated Chinese GDP at some $82 trillion compared with $44 trillion for the US.

However, the Chinese standard of living will remain lower - with per capita GDP in China between half and two-thirds the level of that in the US in 2050, according to the report. Keidel said poverty will remain a significant problem in China for decades despite considerable progress.