By 2016, the United States will no longer be the world’s No. 1 economy. That title will be handed over to none other than the current No. 2: China.
The Organization for Economic Cooperation and Development in Paris said in report published this week that China was on course to surpass the U.S. economy in just three short years.
That’s about the time President Barack Obama will end his second term. The next president will potentially be the first one since World War II that didn’t govern the world’s most powerful economy. Most forecasts, however, have China’s economy at No. 1 in 2020.
“From a long-range perspective, China has now overtaken the Euro area and is on course to become the world’s largest economy around 2016, after allowing for price differences,” OECD said in its China report released this week.
China still has a lot of growing to do. By comparison, it’s per capita income is three and a half times less than that of the U.S., and even less than Brazil. But most economists forecast that China’s rapid urbanization — now at 50% and seen rising to 70% within five years — coupled with higher incomes will change the way China operates. As it is, China is moving from an export driven economy to a more Western one that is geared to its local consumers.
Its new leadership has made social programs a focus of its five year plan as well. China, for all its wealth in the Eastern cities, is still a poor country. And an aging one. China will spend billions building out its social safety net over the next few years, improving the livelihood of retiring and elderly Chinese.
The country is also focusing more on high tech, value-added production. Green energy is a strategic focal point of the country’s 12th five year plan and that means investments in new sectors — from electric cars to lithium batteries, to alternative energies designed to eradicate China’s pollution problem. All of this investment is seen as a further catalyst for rapid growth in China. In theory, new social policies should be able to spread the wealth in this nation of 1.3 billion.
There’s no hard landing coming in China, the OECD attests.
The organization predicted China’s 2013 GDP to come in at 8.5% compared to 2012 growth of 7.5%.
Read More: forbes.com
