The US economy’s strong performance in 2023, along with the challenges faced by China’s economy, suggests that China’s GDP overtaking the US is less likely.
Gross domestic product data released on Thursday shows that the U.S. has pulled further ahead of China in the race for world’s biggest economy, thanks in part to vibrant American consumers.
U.S. GDP rose 6.3% in nominal terms — that is, unadjusted for inflation — last year, outpacing China’s 4.6% gain. While some of the outperformance reflected America’s elevated price increases, the 2023 outturn underscores a broader point: The U.S. economy is emerging from the pandemic period in a better place than China’s
The strong performance of the U.S. economy, in tandem with all the short-term and long-term headwinds the Chinese economy is facing, renders it a less obvious proposition that China’s GDP will someday overtake that of the U.S..
But it also reflects a more vibrant state of economic activity. Consumer spending continues to contribute the bulk of growth, while private-sector investment and trade also contributed, along with government spending. In China, a property bust has not subtracted from output but also hurt broader consumer confidence.
In the economic front, The US surprised to the upside and China surprised to the downside.
The economic outperformance is reflected in the respective countries’ stock markets. US shares have hit all-time highs this week, while Chinese equities are mired in a US$6 trillion-plus (S$8 trillion-plus) bear-market rout.
All the talk of China becoming the world’s largest economy by GDP has been put on the back burner and delayed, if not indefinitely postponed.
