Jan 12 — By 2020, the combined wealth of the E7 – seven of the world’s fastest growing emerging economies including Brazil, China, India, Indonesia, Mexico, Russia and Turkey — is set to overtake that of the G7 – seven of the world’s largest developed economies including Canada, France, Germany, Italy, Japan, United Kingdom and the United States – according to a recent release by the accounting firm PriceWaterhouseCoopers.
The report measures gross domestic product in purchasing power parity terms, taking into consideration price differences of the same goods across nations. Using the same methodology, the report also found that China will overtake the United States by 2018.
If the calculations are made at market exchange rates (taking into account price differences because of the relative value of currencies), the shift in economic power is slower, and yet, still inevitable. Using this methodology, the E7 would overtake the G7 by 2032, and China would overtake the United States in the same year, PwC said.
Though, growth in China is expected to slow after 2020 due to a reduced labor force growth rate resulting from its one child policy. Rapid inflation also remains a destabilizing concern in the quickly growing economies.
Despite this, China will likely remain an export powerhouse, with exporters potentially moving up the value chain to compete on quality rather than price.
“This renewed dominance of China and India, with their much larger populations, is a return to the historical norm prior to the Industrial Revolution of the late 18th and 19th Centuries – that caused a shift in global economic power to Western Europe and the U.S. – this temporary shift in power is now going into reverse,” the PwC report optimistically concluded.