The US economic growth will outpace China’s rate for the next few quarters. This promises to be the first time America will have a sustained period since 1990 where its economy grew faster than China’s.
US Economic Growth Outpaces China’s Rate
US gross domestic product rose 12.2% during the second quarter of 2021. In contrast, China only managed to post a 7.9% gain during the same period. As a result, many economists believe that the US can sustain this faster economic growth rate at least for a few more quarters.
The difference lies in how each nation dealt with the COVID-19 pandemic. When the coronavirus outbreak hit China, the country’s officials quickly shut down entire provinces. As a result, the Chinese GDP fell by 6.7% during the first quarter of 2020. In contrast, the US gained a little.
However, China’s aggressive response initially gave it an advantage over the US. Its economic growth rate zoomed more than America’s for a short while. The US took longer to start its recovery period, but when it did, they zoomed out of the gate.
US Economic Growth Fueled By Stimulus And Near-Zero Interest Rates
The US unrolled a combination of measures to prop up its economy. Vaccination drives helped restore confidence in essential workers to go back to their jobs.
Massive fiscal stimulus paired with near-zero interest rates increased the money available to spend. These measures have helped propel the US economic growth ahead of China since last year.
Government stimulus checks sent to Americans helped households save $2.6 trillion in excess savings. This is nearly seven times as much as household savings in China. Now, the world awaits how the two countries will respond to the Delta variant, and how a resistant virus strain can affect their economic reboots.
US To Outpace China For Five Consecutive Quarters
Moody’s forecasts that US economic growth will outpace China’s for the next five consecutive quarters, beginning the 2nd quarter in 2021. Capital Economics and Oxford Economics agree but gave their prediction a shorter time span of three quarters instead of five.
Note that China does not issue quarterly reports for its economic growth. Economist estimates of Chinese quarter-vs.-quarter results vary widely. However, they all point to US economic growth far bigger for the US than China.
China Will Still Emerge As World’s Largest Economy
Despite the gains made by the US in terms of economic growth rate, China’s march to the top economic spot remains undeniable. Andy Rothman, a China specialist at Matthews Asia, views the growth reversal as a temporary delay.
News on the US’s faster growth rate is “like getting so excited about the Washington Nationals winning five in a row but they’re still five games below .500,” he said.
China holds long-term advantages. They have four times as many people versus the US. Meanwhile, the government also spent decades encouraging growth through savings and investment. In terms of population, China already had it made. However, many other industrialized nations with increased productivity per person managed to slip past it.
China Will Get There
China holds all the cards and it’s a matter of time before it claims the title of having the world’s biggest economy. Oxford Economics estimates that China will claim the top spot in 2030. Moody gave it a few more years and predicted 2038. Once they get the #1 rank, they can set business and consumer trends globally.
Watch the CGTN video report on a US Economist's Views on the Chinese Economy:
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