The GDP size of China and the United States has long been in the spotlight. China's GDP has been growing at a relatively rapid rate, giving rise to the perception that China will overtake the United States in the near future. However, data from recent years show that the GDP size of the United States is still on a growth trend, and the GDP gap between China and the United States is likely to widen further this year.
In the first three quarters of this year, U.S. GDP grew by 24%, which is quite good. At the same time, China's economic growth has also remained at a relatively high level, with GDP growth of 5.5% year-on-year in the first three quarters2%。However, despite China's higher growth rate, the gap between China's growth rate and the growth rate of the United States has not narrowed, but is likely to widen.
The main reasons can be boiled down to two aspects. First, the U.S. is facing a relatively high inflation rate. Since the beginning of this year, the inflation level in the United States has been high, and the latest data shows that the inflation rate in the United States has reached 37%。High inflation has driven up consumer spending, which in turn has pushed up the size of US GDP. However, high inflation also brings a series of negative effects, such as a decline in consumer purchasing power and rising financing costs, which may have a certain negative impact on the US economy.
Second, the U.S. interest rate hike policy has led to the appreciation of the US dollar and the depreciation of the RMB exchange rate. When comparing GDP, the US dollar is usually used as the unit of denomination. As a result, China's GDP needs to be converted into dollar-denominated GDP, and the depreciation of the renminbi makes this conversion process unfavorable to China. This is one of the reasons for the widening of the GDP gap between China and the United States.
While the GDP gap is likely to widen this year, it is foreseeable that the situation will change next year.
First, the Fed's rate hike cycle is expected to end next year. In recent years, the Federal Reserve has continued to raise interest rates, but this policy has brought certain negative effects to the U.S. economy, such as the expansion of U.S. debt and the increase in interest expenses. After the Fed stops raising interest rates, these negative effects may be mitigated to some extent, which will help the development of the US economy.
Second, as inflation comes down, the Fed may shift from a rate hike cycle to a rate cut cycle. Currently, inflation in the United States has fallen to 37%, and if inflation falls further next, the Fed is likely to cut interest rates to stimulate economic growth. This will further boost the size of the US GDP.
Finally, there are some negative effects on the U.S. economy itself. Successive interest rate hikes may increase the cost of financing and increase the operating difficulties of financial institutions. Previously, the bankruptcy and collapse of some small and medium-sized banks in the United States has become a fact. As a result, a draconian interest rate hike policy could put the U.S. economy in even greater distress.
To sum up, the GDP gap between China and the United States is expected to reverse next year, and the GDP gap between China and the United States will be further narrowed.
China and the United States, the world's two largest economies, are attracting attention for their GDP size. While the GDP gap between China and the United States may widen this year, the situation may be different next year. With the Fed's policy adjustment next year and the impact of inflation trends, the GDP gap between China and the United States is expected to further narrow. However, economic development depends on a variety of complex factors, and we need to remain vigilant and continue to pay attention to the future development of the Chinese and American economies.