05/16/2014 04:54 EDT | Updated 07/16/2014 05:59 EDT

Global Economic Projections

The world economy has been going through rapid changes for the last few decades. The emerging economies, led by China, have grown at a rapid pace. This rapid growth has led to restructuring of the world economy. China has emerged as the second-largest economy in the world. However, according to the Centre for Economics and Business Research (CEBR), it is predicted not to surpass the largest economy in the world, United States, any time before 2028.

There are many indicators that show the growing importance of China in the world economy. It is the largest oil importer and, recently, became the world's biggest trader in goods. In 2013, Chinese exports and imports stood at $4.16 trillion. In the last three decades, the value of Chinese trade has doubled every four years. However, the US has a big lead over China when it comes to services. In 2012, the value of US trade in services was $1.07 trillion compared to less than half for China at $471 billion. A significantly higher value of US services indicates the maturity of the economy over that of China.

Even though it is forecasted that China's economy may not overtake the US economy in terms of actual dollar values before 2028, the International Comparison Programme (ICP) has suggested that China may overtake the US as the largest economy this year in terms of Purchasing Power Parity (PPP). A loose coalition of the world's leading statistical agencies, the ICP is hosted by the World Bank. According to PPP, the size of the economy is measured by what money can buy in that respective economy. Measurements by PPP are certainly important; however, they are not the only way of comparing economies. The population of China stands at 1.35 billion, which is more than four times the size of the US population of 313.9 million. Therefore, per capita income in China is predicted to be lower than that in the US even when the Chinese economy overtakes the US economy in dollar terms.

The US is expected to remain as the most advanced economy even if it slips to the position of the second-largest economy in the world. On the other hand, China has to carry out significant changes to join the ranks of advanced and matured economies. CEBR suggests that China's ascent to the largest-economy in the world is taking more time due to the slowdown in the domestic Chinese economy as well as the strength of the US economy. The US is predicted to maintain its lead in university education, innovation and research. Also, it may have more financial capital, including global financial centers like New York City, even when China takes the position of the largest economy in the world. Also, the US may have a significantly higher level of human capital even if it is the second-largest economy in the world. As a high level of human capital is crucial for innovation, the US economy is expected to continue its lead in innovation. Again, energy independence by using shale gas will help to boost the US economy.

On the other hand, China is investing significantly in infrastructure projects that are beneficial for the economy. However, its debt is also increasing. Rising wages is creating a class of domestic consumers. But, the rising wages is also weakening the country's cost competitiveness that has been so crucial in it becoming the global manufacturer. Finally, the country is faced with serious levels of air and water pollution in its quest to develop rapidly. This deteriorates the quality of life of the citizens. Even when China eclipses the US as the largest economy in the world, its citizens are predicted to have lower standard of living and quality of life than their American counterparts.

Looking at the rest of the world, India is expected to surpass Japan to become the third-largest economy in the world by 2028, according to CEBR. A weak yen and unfavorable demographics will lead to Japan losing its position. Again, UK is predicted to overtake France and Germany to become the largest European economy. The emerging economy, Brazil, is forecasted to become bigger than the UK and Germany by 2023. It must be mentioned that economic forecasting in the distant future is quite susceptible to errors as it is quite difficult to predict the consequences of natural resource limitations, geopolitical tensions and the economic effects of changes in the environment, including climate change.

The emerging economies are expected to continue their high growth rates and become significantly-sized economies. However, most of them also have substantial populations and the structure of their economies are still developing, and far from being advanced and mature economies. Even when the emerging economies surpass the advanced economies, it would be quite plausible to state that the quality of life, per capita income and standard of living in the emerging countries will be quite lower than in the rich countries of today. It is not the absolute size of the economy that matters but the standard of living and quality of life of the residents of the country.