With the development of the global economy, there has been fierce competition between China and the United States. In recent years, the GDP of China and the United States has become increasingly close, and China's GDP is expected to surpass that of the United States in 2028 and become the world's largest economy. However, this year's data shows that US GDP grew by 2. year-on-year in the first three quarters4%, and it is expected that the annual GDP scale may reach 28 trillion. This means that the GDP gap between China and the United States has not narrowed, but has a tendency to widen. Why is the GDP gap between China and the United States widening further this year?We believe there are two main reasons.
First, the high inflation rate in the United States pushed up the GDP figures. Although the Federal Reserve continues to raise interest rates and the domestic inflation rate in the United States has retreated, it is still at a high level. The latest data shows that inflation in the United States reached 37%。Under the high inflation rate, Americans have to spend more money to buy goods, and consumer spending has increased, thereby increasing the size of the United States' GDP. However, this also means that there is a certain amount of moisture in the US GDP data.
Second, the RMB exchange rate depreciated as the US dollar appreciated as the Fed continued to raise interest rates. When comparing GDP, countries are usually denominated in US dollars. As a result, China's GDP is denominated in renminbi and needs to be converted into GDP denominated in US dollars. Due to the depreciation of the RMB exchange rate, the converted GDP will be lost. This is one of the reasons why China's GDP has fallen this year.
However, we believe that a major reversal in the GDP gap between China and the United States is likely next year. Here's why:
Currently, the Fed is considering stopping interest rate hikes. The successive interest rate hikes have had some negative effects on the US economy. First, the size of U.S. debt continues to rise, and interest expenses are becoming larger, which may lead to default risk. Second, the decline in inflation caused by interest rate hikes has put upward pressure on financial institutions to raise financing costs, and even led to the bankruptcy of some small and medium-sized banks. If inflation falls further, the Fed could move from a rate hike cycle to a rate cut cycle. This will adversely affect the US economy, which in turn will affect GDP performance next year.
This is despite the fact that the U.S. inflation rate is currently at 37%, but it is likely to continue to decline in the future. If inflation falls further, it will further affect the growth momentum of the US economy. Typically, a decline in inflation stimulates economic activity and consumer spending, which in turn drives economic growth. Therefore, the decline in inflation will help the US economy next year, so that the size of US GDP is expected to exceed this year's level.
Overall, while the GDP gap between China and the United States has widened this year, we believe that a major reversal is likely next year. The Fed's interest rate hike cycle may be over, and inflation continues to fall, which will have a positive impact on the US economy and GDP performance next year. As a result, the GDP gap between China and the United States is expected to narrow further next year.
The high inflation rate is one of the main reasons for the widening of the GDP gap between China and the United States this year. Although the Federal Reserve has been raising interest rates, domestic inflation in the United States remains elevated, with the latest data showing 37%。This high inflation rate has not only increased the cost of living for the American people, but also has had a certain impact on the American economy.
First, high inflation pushes up goods** and increases consumer spending. In the face of goods, the American people have to come up with more money to buy daily necessities, thus increasing consumer spending. The increase in consumer spending has further boosted GDP growth, leading to an increase in the size of GDP.
Second, high inflation will also have an impact on interest rates. In order to control inflation, the Federal Reserve has continuously raised interest rates, which has raised the cost of financing. This is undoubtedly a huge pressure on financial institutions in the United States. Some small and medium-sized banks have already declared bankruptcy due to rising funding costs, which has further affected the stability of financial markets.
In addition, the high inflation rate has also had a certain impact on the U.S. bond market. As the size of U.S. debt continues to increase, interest expenses are also on the rise. If the interest expense of U.S. bonds is too large, it may lead to default risk, which will further detrimental the development of the U.S. economy.
To sum up, the high inflation rate has had a great impact on the U.S. economy, pushing up the size of U.S. GDP, which is also one of the reasons for the widening of the GDP gap between China and the United States this year.
Another factor that has led to the widening of the GDP gap between China and the United States this year is the appreciation of the US dollar. The Fed's interest rate hike policy has led to the continued strengthening of the US dollar, while the RMB exchange rate has depreciated. When comparing GDP, countries usually use the US dollar as the unit of denomination, which leads to China's GDP denominated in RMB and needs to be converted to US dollar-denominated GDP. Due to the depreciation of the renminbi exchange rate, China's GDP may decrease in US dollar terms.
The depreciation of the renminbi exchange rate has had a certain impact on China's economy. First of all, the depreciation of the exchange rate may lead to imported goods *** bringing a certain burden to the lives of the Chinese people. Second, the depreciation of the exchange rate will also increase the external debt burden of enterprises and increase the repayment pressure of enterprises. In addition, the depreciation of the RMB exchange rate may also lead to increased capital outflows, affecting the stability of financial markets.
However, we believe that a major reversal in the GDP gap between China and the United States is expected next year. The reason is that the Fed's interest rate hike cycle may end, the inflation rate will continue to fall, and the RMB exchange rate is expected to recover. This will have a positive impact on the development of China's economy and help narrow the GDP gap between China and the United States.
To sum up, the main reason for the widening of the GDP gap between China and the United States this year is the high inflation rate in the United States and the appreciation of the dollar. However, the situation may be reversed next year, as the Fed's policy may change and inflation is expected to come down. In this case, the GDP gap between China and the United States is expected to narrow further. We can expect the performance of the Chinese and US economies next year, and we also need to pay close attention to the impact of various factors.