China GDP: as IMF lowers economic forecasts, is there still a window of opportunity to surpass the US?

China’s lofty goal of dethroning the United States to become the world’s largest economy has been cast further into doubt given yawningly different growth realities and outlooks.

And the gap could expand again this year given the depreciation of the yuan and the latest economic forecasts by the International Monetary Fund, which cut China’s expected expansion for 2023 from the 5.2 per cent predicted in July to 5 per cent on Tuesday.

The latest “World Economic Outlook” published by the Washington-based fund also revised down next year’s forecast for China’s economic growth from 4.8 to 4.2 per cent.

In turn, the IMF revised up its estimates for the US economy in 2023 from 1.8 to 2.1 per cent and from 1 to 1.5 per cent for 2024.

“China is facing growing headwinds from its real estate crisis and weakening confidence. Among emerging markets and developing economies, the consumption shortfall is particularly large in China, reflecting tight restrictions on mobility during the Covid-19 crisis,” the outlook report said.

Wang Yongli, general manager at China International Futures, attributed the divergence to different economic structures and cycles in a recent report.

He warned that the coronavirus pandemic, US-led containment and local government debt have further complicated challenges for China, leading to weak investment and exports.

The financial standing of American families and businesses, though, emerged from the pandemic largely unscathed, while consumption also remained strong after the deluge of capital inflow triggered by the Federal Reserve’s interest rate increases benefited the US economy.