China is expected to surpass the United States to become the world’s largest economy in a little more than a decade, despite escalating hostilities with Washington, a Beijing-based governmental think tank has forecast. The prediction, made by researchers at the Development Research Centre (DRC) of the State Council, the Chinese government’s cabinet, reflects mainstream assumptions in Beijing about the success of the Chinese government’s new development strategy of focusing more on its domestic market, given the intensifying economic, technological and geopolitical rivalry with the United States. The report also underlines a big assumption in China that the country’s economic rise is unstoppable. Chinese President Xi Jinping reaffirmed on Monday that China must “speed up” the new “dual circulation” strategy he introduced in May, given that the external environment has become volatile and hostile. According to the group of researchers led by Chen Changsheng, who oversees macroeconomic research at the government-run think tank, disputes between China and the US will intensify further in the next five years. “It can’t be ruled out that the US will use all possible methods to contain China’s development, including imposing financial sanctions on Chinese companies by misusing its ‘long arm’ jurisdiction [to impose US law outside America’s borders], seizing China’s holdings of US Treasury securities … coercing other countries to impose technology embargoes on China, as well as excluding China from the [US] dollar payment system ,” according to the report. However, even those factors cannot stop China’s economic rise, the report suggested. The country’s share of the global economy will rise to 18.1 per cent in 2025 from 16.2 per cent in 2019, while the US share will drop to 21.9 per cent from 24.1 per cent in the same period, the researchers predicted. Last month, Justin Lin Yifu, a professor at Peking University and the World Bank’s former chief economist, predicted that China would surpass the US as the world’s largest economy by 2030. However, there are also views that China may never surpass the US to be No 1, due to the former’s ageing population. Yi Fuxian, a senior scientist at the University of Wisconsin-Madison, argued that, from a demographic point of view, China would not be able to surpass the US in the foreseeable future. China’s social security fund is being propped up by local government subsidies, but for how long? And former Chinese commerce minister Chen Deming warned in April 2019 that China should “not make the assumption that we will be No 1 sooner or later”. Economic consultancy Capital Economics issued a report in January this year saying that the impact of deglobalisation would erode China’s economic advantages in the years ahead. “The widespread assumption that China will overtake the US as the world’s largest economy is likely to be proved wrong,” it said at the time. However, the many changes in the world since January – from the coronavirus pandemic to intensifying conflicts between the US and China – make it increasingly unclear how the global economy will evolve. The DRC report argues that while China’s average annual gross domestic product (GDP) growth rate is expected to slow to a range of 5 to 5.5 per cent in the next five years, from the 6.1 per cent rate in 2019, China’s per capita GDP could rise to US$14,000 by 2024, pushing the country out of the “middle-income trap” into the “high-income” category. As a result, the size of China’s economy will exceed that of the European Union in 2027 and surpass that of the US in 2032, the group predicted. Chen Changsheng is one of the government economists who attended a symposium held by Xi last week on the country’s economic and social future in preparation for the development of the 14th five-year plan that will be unveiled next year. While Chen Changsheng did not make a speech at the meeting, the research results from his team are expected to be absorbed into China’s official plans and strategies. His team argued that the global economic landscape will undergo a sweeping change in the coming years as states and multinationals increasingly factor “security” into the design of their supply chains, with the global economy fragmenting into three big blocs centred on North America, Europe and China. Important factors expected to propel China’s future growth are the nation’s “digital economy” and its service sector, both of which are expected to continue to expand in the coming years, the researchers concluded. The industrial sector’s share of China’s GDP could drop to 35 per cent by 2025 from 39 per cent in 2019, while the share of the service sector is expected to rise to about 60 per cent in 2025 from 53.9 per cent in 2019. China’s services sector grew in August at fastest pace in more than two and a half years The contribution of China’s digital economy to the national economy is projected to rise from about 6 per cent in 2019 to 11 per cent by 2025. And China’s middle class is expected to continue to expand rapidly, boosting consumption. China had about 400 million middle-class citizens in 2018, according to World Bank standards. And that level is expected to rise to 560 million people by 2025, the report said. However, they also noted that China’s ambition of creating a massive domestic market will be restricted by the country’s large and increasing wealth gap. In addition, the nation’s rapidly ageing population will be a big challenge for China in the next five years, with one out of every five Chinese citizens being over the age of 60 by 2025, while the country’s labour population is expected to shrink by 20 million during that period. “As a result, savings will fall and labour costs will rise … with a growing burden in terms of pensions, health care and other social welfare needs,” they wrote.