China's Economy to Overtake Euro Zone

It’ll overtake and then persist,” said David Mann, Singapore-based global chief economist for Standard Chartered Bank. “It’s a function of
the economic system, institutional infrastructure, education and hard
infrastructure -- all of which have been moving in Asia’s favor.”To get
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Asia -- including powerhouses Japan and India as well fast-emerging emerging
nations such as the Philippines and Indonesia -- already crowded out
the combined economies of North and South America in 2016, according to
data compiled by Bloomberg. And the faster average growth pace in Asia
is set to be a boon to that yawning gap for many years.China’s leaders,
convening in Beijing for the National People’s Congress, have doubled
down on President Xi Jinping’s ability to keep growth stable, having
removed the limit on his rule. The world’s second-biggest economy is
weathering a gradual slowdown as Xi tries to manage a shift from the
low-wage, high-exports model of the past to a more balanced mix where
stronger domestic spending plays a greater role.
To do so, China faces numerous challenges. It will have to manage ballooning debt,
financial markets need to open to global investors, and the government
will have to adjust to a rapidly aging population. The UN projects that a
quarter of its residents will be over 60 by 2030. China should grow at a
pace of at least 6 percent for the rest of this decade and keep up a 5
to 5.5 percent rate throughout the 2020s, Mann projected. He said it’s
hard to argue that growth in the euro area would be much above 2 percent
for the next couple of decades.While it’s tricky to compare the growth
data across large swaths of time, the best guess as to the last time
China’s economy overshadowed Western Europe was around the mid-1800s,
said Aditya Bhave, global economist at Bank of America Merrill Lynch,
citing figures compiled by the Maddison Project at the University of
Groningen in the Netherlands.
China’s rising trajectory would help return the global economy to a state that’s persisted through most of
history, with the last 150 years being an outlier in which Western
economies outweighed those in the East, Mann said.China’s rapid
re-emergence as an economic powerhouse -- remember it used to be the
world’s largest economy in the 1800s -- has enormous implications,” said
Rob Subbaraman, head of emerging market economics at Nomura Holdings
Inc. in Singapore.The impact of China on global financial markets and
commodities is no longer trivial. But its economic size also brings
economic tensions in terms of market share competition in trade and
investment” as well as foreign policy tensions, according to Subbaraman.