Economist says China remains on course to match the US' economy

A leading British economist has reiterated that, by the end of the 2020s, China's economic output could match that of the United States, as long as the country overcomes "additional headwinds".

Jim O'Neill, chair of the international think tank Chatham House and former chairman of Goldman Sachs Asset Management, said: "China is still broadly on track for what I have been famous for suggesting－by the end of this decade, it will become as big as the USA, and what happens is still consistent with that."

O'Neill estimated that China's inflation-adjusted annual GDP growth for the 2020s would be between 4.5 and 5.5 percent and says the nation's slowing growth should be expected.

"Nobody should be really that surprised that China's growth rate is slowing down," he said. "If China does not slow down to 4.5 to 5.5 percent, I will be very surprised, but it does not mean something is going wrong, other than the demographic: If you have an ageing workforce and low fertility rate, that's what happens."

O'Neill is well known for coining the term BRIC in 2001, to refer to Brazil, Russia, India, and China as four rapidly developing nations that symbolized the shifting balance in the global economy. South Africa was added to the group nine years later, making it BRICS.

O'Neill said people should put China's deceleration into perspective, saying the economy grew less quickly, but still by $800 billion last year, which is equivalent to "creating a Switzerland or two South Africas".

He said this is the start of a challenging period for China because the country is facing a number of cyclical structural challenges, or headwinds.

"If China cannot deal with the additional headwinds, then it won't overtake the US by the late 2020s," he said.

One of the biggest concerns is debt, which has been an issue for years, he said.

"The leveraging issue in the financial system, China cannot go on indefinitely allowing the debt-to－GDP to rise," he explained. "Secondly, it cannot keep squandering resources on 'lost' investments. The more it protects non-real-growth-keeping companies, the more that's allocating resources that could have been helping the new productive investments."

O'Neill pointed out that China's position in international trade, particularly with the US, is another major issue. Despite the fact that both countries have signed a "phase one" trade agreement, "that does not solve any of the underlying issues, leaving in place very high tariff s", he said.

"It could easily come back to bite China."

With hundreds of thousands of Chinese people studying overseas, and millions traveling abroad every year, O'Neill said China needs to think through more carefully about how to use that soft diplomatic presence in its favor.

"It might not matter 20 years ago how it deals with many parts of the world that do not have the same philosophical structure, but because China now is so big, it kind of does now," he said. "If China succeeds with that, there is no challenges that China won't be able to succeed with."

And on the subject of the impact of COIVD-19 on China's growth, O'Neill, who chaired the UK government's Review on Antimicrobial Resistance, remains optimistic that a robust recovery in the second half of the year might off set the economic dent.

"The quicker you shut things down and know that you have confidence controlling the infection's spread, the more confident you can be in the second half of the year. The overall growth performance for the year might not be negatively affected," he said.