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Report: China Top Economy in 2020, India in 2050

Mar. 30 – India, currently boasting the fourth-largest economy in the world in terms of purchasing power parity (PPP), will become the largest by 2050, according to the 2012 edition of The Wealth Report released this week by global property firm Knight Frank and Citi Private Bank. The report also predicts China, currently the world’s second largest economy, will take the top spot from the United States by 2020.

According to the report, by 2050 the Indian economy is expected to be worth $85.97 trillion while China’s GDP would stand at $80.02 trillion. Both figures are forecasted to be dramatically higher than that of the United States, which is expected to have a GDP of $39.07 trillion by 2050 – dropping two places from the current number one spot.

Other nations ranked among the world’s top 10 largest economies in 2050 are Indonesia (4th), Brazil (5th), Nigeria (6th), Russia (7th), Mexico (8th), Japan (9th) and Egypt (10th).

The report emphasizes the movement of wealth concentration from Western markets towards Eastern Markets; the West’s share of global real GDP is predicted to fall from 41 percent in 2010 to just 18 percent by 2050.

Southeast Asian deca-millionaires (those with $10 million or more) already outnumber those in Europe and are expected to exceed those in the United States in the next decade.

In terms of forecasted average annual economic growth between 2010 and 2050, emerging Asia had a dominating presence on the report’s top 10 growth list while the traditional developed markets of Europe made up the majority of the report’s bottom 10.

The IMF predicts emerging economies will expand by 5.4 percent in 2012 and 5.9 percent next year. While this certainly marks a significant downgrade from previous forecasts, it still exceeds the average GDP growth rate of 1.2 percent and 1.9 percent expected this year and next, respectively, in the world’s most developed economies.

The report also highlights 400 “middleweight” cities of the emerging global economies; those with populations of between 200,000 and 10 million. Such cities include many that are still unknown to the wider world, such as Linyi, Kelamayi and Guiyang in China and Surat and Nagpur in India. Together, they are expanding the global middle-class by millions of families and creating new market opportunities for local and multinational companies.

In China, so-called second and third-tier cities are expected to be key drivers of growth towards the year 2050. Some investors believe Dalian, a major port and software center, or Chongqing, a mega-city of 30 million people currently attracting immense sums of investment, could join the future list of the most important global cities.

In addition to tracking GDP growth, the report also provides an insight into which cities are considered to be the most important to the world’s high net-worth individuals (HNWI). To gauge this, Citi Private Bank’s global wealth advisory team and Knight Frank’s global network of luxury property specialists surveyed 4,000 of their high net-worth clients.

The results show that Beijing and Shanghai are the top two fastest growing cities in terms of their importance to HNWI and will represent the third and fourth most important cities in the world, respectively, in 10 years’ time (behind only London and New York City). In terms of GDP growth (1 of 31 indicators), 9 out of the top 10 cities were in China and all of those in the top 20 were in either China or India.

In addition, when leading commentators were asked to predict the world’s top city in 2050, Shanghai emerged as the most popular choice. The report cites Shanghai’s abundance of sky-scrapers (double that of New York) and aspirational status among ambitious entrepreneurs seeking to make their fortune there as traits of a city with a successful “brand.” This is thought to be an important factor in determining its perceived value.

“[Shanghai] has the world’s largest container port, fastest train, longest metro system and is currently working on the world’s second tallest building,” said Bryn Anderson, valuation director at Brand Finance in London. “But what is vitally important in a global city is a strong brand. Frankfurt and Hong Kong lose out to New York and London as global cities because nobody dreams of ‘making it big’ in Frankfurt. A true global city is one with a brand people recognize, an image to which they aspire and a place where they dream of living. Shanghai performs well on all these and is where the next generation of ambitious entrepreneurs and visionaries will dream of making their mark.”

In terms of real estate, the report noted the importance of China’s housing market, describing it as “the single most important sector to the entire global economy.” Construction in China in 2011 accounted for 13 percent of China’s GDP, 20 percent of global steel production, and was the dominant consumer of the world’s iron, copper and cement.

Of the world’s most expensive cities for real estate, Hong Kong was ranked 4th ($47,500 per square meter), Singapore 13th ($25,600), Shanghai 22nd ($19,600), Beijing 26th ($17,400) and Mumbai, the only Indian city in the top 40, was ranked 36th ($11,400).

Monaco remains the most expensive residential location, with one square meter worth on average $58,300, followed by Cap Ferrat and London.

The report highlights India’s weaker economic conditions and high inflation, with a decision by the Bank of India to raise interest rates 13 separate times in 2011, as the primary causes of real estate prices in Mumbai falling by more than 18 percent last year. India’s prime market is unusually vulnerable to internal economic events because the country’s strict limits on foreign buyers removes the potential safety net provided by inward capital flows from overseas buyers.

The breathtaking growth of the luxury sector in the Asia-Pacific region was cited as an indicator of shifting global wealth eastwards, with the Swiss group Richemont (owners of Cartier) reporting sales growth of 140 percent over the past five years, compared with 27 percent in Europe.

Despite expanding across China, where the luxury market grew by 35 percent last year, Cartier only has one store in India due to the country’s 50 percent tax on luxury purchases, despite the vast potential of the Indian market.

Although it has a global scope, The Wealth Report 2012 shows emerging Asia in a particularly good light – and rightfully so. The region as a whole is set to explode in the coming years in terms of economic growth, consumption, and its role in global affairs. The full report, available here in PDF format, is a truly worthy read for anyone interested in learning about, doing business with, or establishing operations in the emerging Asia region.

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7 Responses to Report: China Top Economy in 2020, India in 2050

  1. Girish says:

    The problem with China is that they have to survive a death storm when CCP will be challenged and there will be no other party or ideology to replace it.

    Also, I just wonder that China is 6 trillion and India 1.9. China is 3x of India but it consumes almost 5 to 9 times more resources then India for 9-10% of GDP growth against Indians 7.5 to 8.5 percent.
    I strongly believe that return of investment in China is far inefficient then India with expensive and wasteful expenditure.
    Also just wondering what will happen to Chinese economy which depends on export upto 35% of its GDP when its labour wages are growing at 20% perannam with immerging manufacturing competitors like India & Vietnam etc. Also most important element, China demographic divident is going for an end by 2016 and industry will start facing labor issues.
    I believe that out of 9% GDP growth of China, atleast 3% of it comes of unnecessary development of infrastructure and development of huge, expensive ghost cities being built for the aliens (Average Chinese couple with 4 parents and a child to be supported cannot handle the expenses of life and house mortgages easily).
    I was shocked to read yesterday that Chinese consumes 50% of world cement output and have more per capita consumption then US citizen, it is more astonishing that average Chinese is still 30 years away from US level of per capita and standard of living.
    Considering China will continue infra development for next 30 years, by then an average chinese will have atleast 5 times more infra development then an average American today with same level of income and living standard.
    China is a bubble and CCP don’t know how to stop and correct thing now without disturbing people and its own chair.

  2. Girish says:

    April 2012

    India is third largest Economy (PPP) and 8th largest in nominal terms.

    from Wikipedia

  3. Joseph Tan says:

    Where is Iran? Why not she be in top 10 if Egypt is there? Remember Iran was a world hyper-power. She command huge allegiance (even now) from the border of India all the way to Mediterranean.

  4. The_Observer says:

    Just a few observations:
    (1) PPP multipliers change over time as an economy develops and inflation kicks in. 38 years is a long way away.
    (2) Calculations for growth 38 years into the future are fraught with assumptions and unrealistic projections. You have to consider that unexpected happenings may occur such as the last GFC, Japan’s long delayed banking and immigration reforms, etc
    (3) People presenting these projections may be assuming too much of the competency of a country’s ruling class and the abilities and skill-sets required of the general population to achieve the projected growth. Is the education infrastructure and resources needed available?
    (4) There is probably a very large global black economy that has to be considered if realistic growth rates for individual countries can be accurately calculated.
    (5) India (Est. 1947) which is mentioned in this article is a subcontinent country of different races and religions and the world’s 9th economy by nominal GDP and 4th in PPP terms. I would suggest that India would have to overcome many of the disadvantages that brings to a country if this prediction to be the number 1 economy in PPP terms were to be fulfilled. The country is currently racked with poverty with a lack of food, water and little care and education for a large number of the young. There is corruption at all levels and inflation rising. My opinion would be to bet against that being achieved by India even in PPP terms by 2050.

  5. Ankash says:

    @ The observer… My friend India is not a country in crisis as you make out. Do you know India is the first country in the world to give Bio- Metric Id to all its citizen’s. So the Govt can disperse funds direct to her citizens thus eliminating corruption. IT will bring immense change to the country in the coming decades. Already, the Govt has floated tenders for low cost tabs ( Aakash slab) which is given to all School students and colleges.More emphasis on IT is stressed these days. If am not wrong India is already the third or Fourth largest internet user in the world after USA.

  6. Eduardo says:

    @The_Observer you are right! besides, the GDP (PPP) doesn’t carry any weight in world matters so there isn’t any point on making a World ranking based on the highest GDP adjusted to the PPP, it should always be over the nominal GDP.

    I remember seeing not long ago that Taiwan and Japan had similar GDP (PPP) per capita but since Japan has a substantially higher GDP (nominal) per capita than Taiwan it just means that a Japanese could live like a king with an average Japanese salary in Taiwan, but a Taiwanese would have a really hard time having a decent life if he had to live in Japan with an average Taiwanese salary.

  7. Manish says:

    India is the 3rd or 4th largest economy in the world. It has all the resources and I believe that its soft policies affect hard the economy. after all it is the land which gave birth to the human civilization.

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