CHINA 'OVERTAKES U.S. AS THE WORLD'S LARGEST ECONOMY'

                                

According to figures from the International Monetary Fund, China has toppled America to become the biggest economy in the world.

Meanwhile the US has been the global leader since it overtook Britain in 1872, but has now lost its status as top dog.

The latest IMF figures show the Chinese economy is worth £11trillion compared with £10.8trillion for the US.

China whose wealth has accelerated in recent decades amid rapid industrialisation is expected to extend its lead, with the IMF estimating its economy will be worth £16.7trillion in 2019. Which means it would be 20 per cent bigger than the US economy, which is forecast to be worth £13.8trillion by then.

The numbers are based on ‘purchasing power parity’ (PPP) which makes adjustments for the fact that goods are cheaper in countries such as China relative to the US.

Without these adjustments for living costs, the Chinese economy is still smaller than that of the US, at £6.4trillion.

But experts have described the toppling of America after nearly 150 years by China – even on the PPP measure – as a ‘symbolic’ moment for the global economy.

China enjoyed three decades of double-digit growth before the global downturn, as industrialisation and sweeping economic reforms created a new powerhouse in the East.

Growth has slowed in recent years but remains strong by Western standards with the IMF forecasting expansion of 7.4 per cent this year and 7.1 per cent in 2015.

By contrast, the IMF is predicting growth of just 2.2 per cent in the US this year and 3.1 per cent next year, while the UK is set for expansion of 3.2 per cent and 2.7 per cent.

The Fund yesterday said the US and the UK ‘are approaching economic lift-off’ as they bounce back from the recession. But Olivier Blanchard, chief economist at the IMF, warned that ‘potential growth is lower than it was in the early 2000s’ for much of the West, including the US and UK.

He added that China is ‘maintaining high growth’ which will slow in the coming years to a more ‘healthy’ level between 6 per cent and 7 per cent. Arvind Subramanian, senior fellow at the Washington-based Peterson Institute and an expert on China, recently highlighted the ‘symbolic’ importance of China overtaking the US.

‘China is very big and getting bigger,’ he said. ‘It’s not to be underestimated.’

The news that China is now the largest economy in the world is an embarrassment for Barack Obama and ends America’s 142 years at the top.

Britain had out-produced the US and its European rivals for much of the 19th century, at the height of the industrial revolution and with trade links across the Empire. But the US caught up as a growing population, the expansion of the railways and a focus on industry as well as agriculture boosted its economy.