China to Become World’s Largest Economy in 2024

Over the next 10 years, China’s economy is expected to re-balance towards more rapid growth in consumption, and will become the world's largest economy in 2024, according to IHS, Inc.

The rapid growth will help the structure of the domestic economy as well as growth for the Asia Pacific (APAC) as a region.

Chinese consumer spending is forecast to grow at an annual average rate of 7.7 percent per year in real terms over the next decade, becoming a key engine of global consumer demand and world growth, according to IHS.

In 2024, China will overtake the United States in terms of nominal gross domestic product (GDP) measured in U.S. dollars. In 2024, IHS forecasts that China’s nominal GDP will be US$28.25 trillion to the US’s US$27.31 trillion.

“In 2025, if we were to take a global economic snapshot, China’s economy will play an even bigger role as a key driver of global trade and investment flows,” said Rajiv Biswas, chief Asia economist for IHS.

IHS forecasts total Chinese consumer spending to grow from US$3 trillion to US$11 trillion by 2024 at an annual average rate of 7.7 percent per year. China’s share of world GDP is forecast to rise from around 12 percent in 2013 to 20 percent by 2025.

Transformational impact on global economy

With total Chinese consumer spending having already exceeded $3 trillion in 2013, the impact of the rapid growth of Chinese consumer spending is already having a transformational impact on many segments of the global economy.

The projected future rapid growth of Chinese consumer spending over the next decade will propel the Chinese consumer market to become an $10.5 trillion consumer market by 2023, around three times larger than Japan, which is projected to be a $3.7 trillion consumer market.

India, which also is expected to be a fast-growing consumer market but starting from a much lower base, is expected to be broadly similar in size to the Japanese consumer market by 2023.

China’s impact on Asia Pacific

“The transmission effects of the strong growth in Chinese consumer demand are already being felt throughout the Asia-Pacific region,” says Biswas.

One notable impact has been through Chinese international tourism visits to other Asian countries, something that has surged over the past three years.

Total Chinese tourism spending abroad rose by 26 percent in 2013 to $129 billion. That makes China the largest source market for international tourism spending globally, according to United Nations World Tourism Organisation estimates.

The impact of this rapid growth in Chinese tourism was felt in many Asian countries, most notably Thailand, where Chinese tourism visits rose by 68.8 percent in 2013 to a total of 4.7 million visitors.

Chinese tourism visits to other ASEAN (Association of Southeast Asian Nations) countries also showed strong increases, albeit not as dramatic as for Thailand.

Boost to ASEAN exports and long-term growth

The implications of an additional $7 trillion being added to annual Chinese consumption by 2023 have tremendous positive implications for APAC regional growth.

“Rapid growth in Chinese consumption drives demand for exports of commodities, manufactures and services from other APAC countries to China, with ASEAN countries expected to be major beneficiaries of the growth in Chinese consumption,” notes Biswas.

ASEAN countries already have seen their regional exports to China growing at an average annual rate of 20 percent per year over the last decade.

The further rapid expansion of Chinese consumer demand will provide a significant boost to ASEAN exports and GDP growth over the long-term.

Other APAC economies with strong trade ties to China, such as South Korea and Australia, also will be important beneficiaries from the rapid growth of Chinese consumer demand.