In the first three quarters of this year, U.S. GDP grew by 24%, and the annual growth rate is expected to exceed this level and is expected to reach $28 trillion. This shows that the U.S. economy is still maintaining a relatively stable growth trend. At the same time, China's economy has also shown strong growth momentum after the lockdown was lifted this year, with GDP growth reaching 5.% in the first three quarters2%。However, the GDP gap between China and the United States has not narrowed as a result, but has continued to widen.
The current high inflation rate in the United States is one of the main reasons for the expansion of GDP size. Although the Federal Reserve continues to raise interest rates to control inflation, inflation in the United States remains persistently high. The latest data showed that inflation in the United States reached 37%。In the face of soaring prices, Americans can only pay more for goods, which in turn promotes the growth of consumer spending, thereby increasing the size of GDP. Therefore, it can be said that there is a certain amount of moisture in the GDP data of the United States.
Successive interest rate hikes in the United States have led to an increase in the value of the US dollar, which in turn has led to a depreciation of the yuan. Since countries are usually denominated in the US dollar, this means that China's GDP must be converted through an exchange rate based on the US dollar. This puts China at a disadvantage in the GDP comparison. Excluding exchange rates, China's GDP growth is not inferior to that of the United States.
However, there have been recent signs that the Fed may stop raising interest rates. The main reason is that successive interest rate hikes have also brought some negative effects on the US economy. First, as U.S. debt continues to climb and interest payments become higher, the risk of debt default is increasing. Second, although the decline in inflation caused by successive interest rate hikes is conducive to economic stability, it has also increased the pressure on the financing costs of financial institutions, and even led to the collapse of some small banks. Therefore, if inflation falls further, the Fed is likely to move to a rate-cutting cycle, which will have a negative impact on the US economy.
For now, it seems that the GDP gap between China and the United States is still widening in 2023, but a reversal could be possible next year. The main reason is that the Fed's rate hike cycle may be over, the inflation rate is expected to continue to fall, and the rate hike will adversely affect the US economy. This will lead to a continued narrowing of the GDP gap between China and the United States.
For China, the domestic economy still maintains a relatively strong growth momentum. With China's large-scale economic restructuring and innovative development, economic growth is expected to remain at a reasonable level in the future. At the same time, China's continuous reform and opening-up policy will also provide new impetus and opportunities for economic development.
From an individual perspective, the change in the GDP gap between China and the United States reflects the reality of the economic development of the two countries. Although China's economic growth rate is relatively high, there is still a gap in size compared to that of the United States. However, China's economy has huge development potential and is expected to make up for this gap in the future. To achieve this goal, China needs to continue to deepen reform, expand opening-up, accelerate the pace of innovation, and improve its core competitiveness.
To sum up, the GDP gap between China and the United States is expected to continue to widen this year. The high inflation rate in the United States and the appreciation of the dollar have a positive effect on the size of GDP. However, the situation may be different next year, with the US interest rate hike cycle likely to end, inflation expected to come back down, and the GDP gap between China and the US to narrow further. In the future, China will continue to maintain the momentum of economic growth and strive to close the GDP gap with the United States. This requires China to continue to deepen reform, increase opening-up, enhance core competitiveness, and achieve sustainable economic development.