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China will overtake the United States as the largest economy as early as 2018 on purchasing power parity as the financial crisis accelerates the shift in economic power to emerging economies, a PricewaterhouseCoopers report said yesterday.
Measuring gross domestic product at PPP, which factors price differences of the same goods across countries, the report disclosed the combined GDP of the seven biggest developing economies will exceed that of the Group of 7, making up the world's largest industrialized economies, before 2020.
China and India will lead the growth of the "Emerging Seven."
The accountancy firm also counts Brazil, Russia, Mexico, Indonesia and Turkey as the other members of the E7. These emerging economies have been leading the world out of the global slump caused by the financial crisis in developed nations, with China replacing Japan as the second-largest economy last year.
If based on GDP at market exchange rates, the shift in the economic world order is slower, but still inevitable, with the E7 slated to overtake the G7 around 2032. China would also overtake the US that year to become the biggest economy in the world based on MER, PwC said. Using MER does not correct for price differences.
China's economy is, however, expected to slow progressively after 2020 due to its significantly lower labor force growth because of its one child policy.
Despite this, China will remain an export powerhouse, with exporters moving steadily up the value chain to compete increasingly on quality rather than price.
Source: Shanghai Daily
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