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China map as flag ALEKSA/iStock/Thinkstock
China is poised to take over the No. 1 spot as the world's largest economy by 2030.

The world’s next largest global economy

Defining policy actions and market volatility

The world is far more dynamic, fluid, and technology driven than most appreciate. Consider: What country will be the world’s next largest economic power? What country will have technological supremacy in 2025? What country will have financial supremacy in 2035? What country will have military supremacy in 2047?

The answer to the first question provides insight into the near- or longer-term resolution of the United States and Chinese policy negotiations and market outlook, especially in the first half of 2019.   

The following is one bank’s economic outlook expectation.

Will Martin, Business Insider, in a January 10, 2019, article, "The US could lose its crown as the world's most powerful economy as soon as next year, and it's unlikely to ever get it back." (https://read.bi/2siDw1M) makes the following points:

  • The US could lose its crown as the world's biggest economy as soon as next year, according to data from Standard Chartered.
  • Once it falls behind China, it is unlikely to regain the top spot, and by 2030 it could also be behind India.
  • By 2030, the bank said, Asian gross domestic product will account for roughly 35 percent of global GDP, up from 28 percent last year and 20 percent in 2010.
  • Six of the world's 10 largest economies could be in Asia in the next decade.
  • Using Purchasing-power-parity (PPP) alone, China is already considered the world's largest economy, but on a nominal basis the US remains in the lead. The Purchasing-power-parity (PPP) exchange rate (or conversion rate) between two countries is the rate at which the currency of one country needs to be converted into that of a second country to ensure that a given amount of the first country's currency will purchase the same volume of goods and services in the second country as it does in the first. Link: https://bit.ly/2OC7TxK
  • "Our long-term growth forecasts are underpinned by one key principle: countries' share of world GDP should eventually converge with their share of the world's population, driven by the convergence of per-capita GDP between advanced and emerging economies," a team of economists from the bank wrote in a note to clients.

Jeff Desjardins, Visual Capitalist, in a January 11, 2019, illustration and discussion “Chart: The World’s Largest 10 Economies in 2030,” (https://bit.ly/2H7WQcu)  is graphically revealing.

World’s Largest Economies in 2030

  1. China 2030 - $64.2 trillion, 2017 - $23.2 trillion or +177 percent
  2. India 2030 - $46.3 trillion, 2017 - $9.5 trillion or +387 percent
  3. United States 2030 - $31.0 trillion, 2017 - $19.4 trillion or +60 percent
  4. Indonesia 2030 - $10.1 trillion, 2017 - $3.2 trillion or +216 percent
  5. Turkey 2030 - $9.1 trillion, 2017 - $2.2 trillion or +314 percent
  6. Brazil 2030 - $8.6 trillion, 2017 - $3.2 trillion or +169 percent
  7. Egypt 2030 - $8.2 trillion, 2017 - $1.2 trillion or +583 percent
  8. Russia 2030 - $7.9 trillion, 2017 - $4.0 trillion or +98%
  9. Japan 2030 - $7.2 trillion, 2017 - $5.4 trillion or +33 percent
  10.  Germany 2030 - $6.9 trillion, 2017 - $4.2 trillion or +64 percent

China’s negotiating position strengthening with time

China, the world’s soon to be largest economy, through sheer economic growth, is building bargaining power in today’s trade negotiations, which makes the outcome less than certain for the United States. Couple that with ongoing Chinese momentum to achieve global technological supremacy by 2025, and China’s negotiating power with the U.S. is further enhanced, as is China’s negotiating power with the rest of the world.

The Point

Given the previous discussion, the outcome of U.S. trade negotiations with China are less than uncertain. China is in a strong U.S. and global policy negotiating position; therefore, U.S. Chinese and global fiscal, monetary, and trade policy negotiations will be ongoing and likely contributing to a continuation of the ongoing global slow down at least over the next two to six months and possibly into next year.

This is extremely important because it is having a huge near-term impact on global currency, bond, equity, and commodity markets.

 Market outlook, broadly speaking two to six months

U.S. Dollar. Sideways with upside bias 

U.S. 10-Year Treasury. Yield or interest rate sideways, low possibly in place, but the degree of global weakness over the next two to six months will define a retest of the previous low or potentially a new low  

U.S. Equities. Expect high volatility, sideways downside bias, likely searching for a lower low, possibly two to five months out

Emerging and Frontier Markets. U.S. dollar strength places a drag on emerging markets, high volatility, downside bias, searching for a low, which could also be two to five months out

$WTIC Oil. Sideways, I suspect, still in search of a bottom, but, probably starting no later than the second half of 2019, we will likely see building demand and stronger prices. Given global policy disputes, this market could be exceptionally volatile.

Rice, grains and cotton. Global policy disputes, slowing global growth and fundamentals weigh heavily on these market prices, while weather uncertainties provide hope for support. From the previous discussion, one can gain an enhanced understanding that ongoing policy disputes, especially between China and the U.S., are slowing global growth and the demand for hard assets near term.

Livestock. Potentially more bullish than bearish.

Other media

Video: Farm Futures’ Bryce Knorr, "2019 Grain Market Outlook,” (https://bit.ly/2VRELmk) 01/10/2019,

Cotton Market Outlook and Policy Update with Dr. Don Shurley, University of Georgia, January 17, 2019 3:00 PM CST. Link to register: http://bit.ly/UAEX-Cotton-Update-Shurley-01-17-19 …

Westhoff market outlook and policy webinar

The Market Outlook under the New Farm Bill January 24 ( http://bit.ly/UAEX-Market-Outlook-FarmBill-Westhoff) 2019. 10 AM CST

Source: Bobby Coats, professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: recoats@uark.edu., is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

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