China to Become Largest Economy by 2024China is set to overtake the U.S. as the world's largest economy in U.S. dollar terms over the next decade, according to a new report by IHS Economics.
IHS measured the size of China's economy in U.S. dollar terms, rather than using purchasing power parity - a technique used to determine the relative value of different currencies - which other research houses have used in the past.
Last month, the International Comparison Program - backed by the World Bank and the United Nations - forecast China could overtake the U.S. as soon as this year, based on the PPP measure. The research puts China's gross domestic product (GDP) at 87 percent of the U.S. in 2011, compared to 43 percent in 2005.
Those who use the PPP measure argue that it is a more accurate measure of the cost of living. IHS told CNBC it chose to evaluate the size of China's economy in dollar terms because it was a more definitive measure.
"Over the next 10 years, China's economy is expected to re-balance towards more rapid growth in consumption, which will help the structure of the domestic economy as well as growth for the Asia Pacific (APAC)as a region," said Rajiv Biswas, Chief Asia Economist for IHS Economics.
This surge in consumer spending will see China's nominal gross domestic product hit $28.25 trillion by 2024 from its current $10 trillion, larger than the $27.31 trillion projected for the U.S., the research firm said. U.S. nominal GDP currently stands at $17.4 trillion.
"In 2025, if we were to take a global economic snapshot, China's economy will play an even bigger role as a key driver of global trade and investment flows," Biswas said, adding that China's share of world GDP is forecast to rise from around 12 percent in 2013 to 20 percent by 2025.
Rapid consumer growth will likely see the Chinese consumer market grow to $10.5 trillion by 2023, around three times larger than Japan, which will sit at $3.7 trillion, IHS said.
While many other research houses agree that China will eventually overtake the U.S. economy they do differ on the timing. London-headquartered news publication The Economist forecasts China will become the largest economy in 2021, while London based consultancy Centre for Economic and Business Research forecasts a later date of 2028.
The impact of China's rapidly expanding consumption is being felt across Asia Pacific. One key sector is tourism; Chinese tourism spending rose 26 percent in 2013 on the previous year to $129 billion, making China the largest source of tourism in spending globally, according to United Nations data.
Thailand, in particular, has benefited, with Chinese tourism visits up 68.8 percent in 2013 compared to 2012 to 4.7 million visitors.