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The Largest Economy in the World in 2018 – I Would Like to Make a Bet with The Economist

Author: Michael Pettis  ·   ·   › Share This Print

I recently read in The Guardian an article by enthusiastic orientalist Martin Jacques in which he says that The Economist has just predicted that China’s GDP, measured in nominal dollars, will will be the world’s largest by 2018.  Earlier estimates, he says had China becoming the largest economy in the world by 2027

I have always been a little skeptical about the 2027 claim, not that it is implausible, let alone impossible.  It is just that given how much we would have to assume about the sustainability of Chinese growth, about the likelihood of current GDP numbers not having been vastly inflated by an over-investment boom, and about the instable range of political outcomes, it seemed to me to be a prediction about as valuable as the world-beating predictions about the USSR in the 1960s or Japan in the 1980s.

Still, this 2018 prediction deserves I think more than a little questioning — it requires that nominal Chinese GDP growth in dollars outpace nominal US GDP growth by 12% a year.  I know that in the past The Economist has tended to be a little less skeptical than some others have been about the sources and components of the Chinese growth miracle (not always — different writers at The Economist seem to have very divergent opinions on the subject), but this is a pretty aggressive prediction, more in line with what I would expect from an investment bank, or from a consulting company that helps foreigners access the Chinese consumer market.

I believe some people from The Economist do read my blogs from time to time and so I am wondering whether we could set up a friendly bet — not for too large stakes, please, since my resources are limited, but just so that we can both keep up a sporting interest in the economic news over the next few years.  I would like to bet that by the end of 2018 China will not be the largest economy in the world.

If I win, perhaps The Economist could invite a very cool underground Chinese band of my choice to perform at their next big conference, whereas if I lose I could buy four-year subscriptions (student rates, please) to a group of Peking University freshmen.  Everybody would end up feeling pretty pleased with themselves no matter who wins, right?  So?

Filed under: Asia, Emerging Markets

34 Responses to “The Largest Economy in the World in 2018 – I Would Like to Make a Bet with The Economist”

FREAKONOMIST • May 14th, 2012 at 1:17 am

while you are busy thinking whether china will grow or not , perhaps you might question the sustainability of the US economy itself…..after the last recession and the mounting debt of the US
china just needs to keep its pace. the US might as well fall from grace just by itself.

kietgene • May 18th, 2012 at 6:18 pm

India will soon see the downturn in next 1 or 2 years .
The politics are doing nothing either be India shining or dooming , they are fooling poor for petty votes and looting the public money so when the recession comes , they still can afford luxury.
The market cycle has been 1992-2000-2008-2016 ????

side effects • July 23rd, 2012 at 11:15 am

Still, this 2018 prediction deserves I think more than a little questioning — it requires that nominal Chinese GDP growth in dollars outpace nominal US GDP growth by 12% a year

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Jonathan • May 30th, 2013 at 1:34 am

Okay, I'll take your bet. How much do you want to bet? There are websites where you put the money in escrow and whoever gets the bet right wins the money.

I'll bet you $100 that China is a larger economy than the USA in 2018

I don't say largest country because perhaps the EU unifies into one country and has growth or some other scenario, but I know one thing FOR SURE: China will outgrow the USA by 2018, barring some global recession but that will hit the USA harder than China, who is shifting to domestic consumption. Basically if China's 1.4 billion people start consuming what America's 300 million do, they could stop exporting to the USA without hurting economically. It's not a hard challenge and their govt has taken steps to promote this shift and it's WORKING according to the latest figures.

China's economy is estimated to be 12 trillion right now, and the US is at 15.5 trillion, the USA is currently growing at less than 2% while China is growing at 7.7%. At the current rate China will overtake the USA by 2016 or 2017, not 2018.

And considering Texas will likely secede from the USA when Hillary Clinton wins in 2016 (they won't want to stay for 8 more years of Democrat rule and may trigger a domino where other states secede with them), I'd say it's a VERY safe bet to say the USA economy will be smaller by 2017 or 2018.

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