China will overtake the U.S. as world’s top economy in 2020, says Standard Chartered Bank

The report also predicts India's economy will surpass the U.S. by 2030.

  • The Standard Chartered Bank, a British multinational banking and financial services company, recently issued a report to clients outlining projections about the world economy up until 2030.
  • The report predicts Asian economies will grow significantly in the next decade, taking seven of the top 10 spots on the list of the world's biggest economies by 2030.
  • However, the researchers formed their predictions by measuring purchasing power parity at GDP, which is an approach that not all economists would use in these kinds of projections.

China is poised to overtake the United States as the world's top economy as early as next year, according to a new report by the Standard Chartered Bank. Its analysts discovered this new status by surveying countries' purchasing power parity (PPP) exchange rates and nominal GDP.

The shakeup will be fueled largely by a strengthening of the middle class in Asian countries, suggests the report, which was covered by MarketWatch. "The global middle class is at a tipping point," Standard Chartered researcher Madhur Jha said in the report. "By 2020, a majority of the world population will be classified as middle class. Asia will lead the increase in middle-class populations even as middle classes stagnate in the West."

India is also estimated to overtake the U.S. economy by 2030, largely thanks to rapid urbanization.

"India will likely be the main mover, with its trend growth accelerating to 7.8 percent by the 2020s partly due to ongoing reforms, including the introduction of a national goods and services tax (GST) and the Indian Bankruptcy Code," Standard Chartered said.

The researchers wrote that Asia will see significant economic growth as the size of economic output begins to match the size of population."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," the report states.

Meanwhile, the researchers predicted that the economies of Europe and the U.S. will continue to grow, albeit at a slower rate, and that wealth inequality will continue to worsen in the U.S.

Visual Capitalist created a graphic that illustrates the report's projections for how the world's top economies will stack up in 2030.

If the predictions come true, countries such as Canada, France, and the U.K. would be edged out of the top 10 global economies.

Not so fast: Different measurements keep the U.S. on top

It's important to note that the report forms its predictions by measuring PPP at GDP, while some economists would use market exchange rates instead of PPP (you can read about the differences in these economic approaches here).

"By [using simple market exchange rates] the U.S. is still today the world's biggest economy, with a $7 trillion lead over China," wrote Ben Chu for The Independent. "Using market exchange rates rather than PPP would also most likely change the 2030 picture. The International Monetary Fund does not forecast beyond 2023, but at this date the Fund thinks the U.S. will still be the world's largest economy at market exchange rates and that the U.K. will still have a comfortable lead over the likes of Indonesia, Turkey, Brazil, Russia and the rest with little evidence of catchup."

Chu continued: "The reason why China is larger than the U.S. at PPP exchange rates is because it has a population four times larger. If one measures GDP at PPP per person a very different picture emerges, with China on $18,000 and the US on $63,000."

What's more, the most important thing to keep in mind when considering these kinds of economic predictions is probably the fact that none of these measurements necessarily gives you an accurate picture of the standards of life in a given country. So, just because a country has a bigger economy doesn't necessarily mean it has more freedom, higher wellbeing or better institutions.

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  • The finding builds on the hygiene hypothesis, first proposed in 1989.

Are modern societies trying too hard to be clean, at the detriment to public health? Scientists discovered that a microorganism living in dirt can actually be good for us, potentially helping the body to fight off stress. Harnessing its powers can lead to a "stress vaccine".

Researchers at the University of Colorado Boulder found that the fatty 10(Z)-hexadecenoic acid from the soil-residing bacterium Mycobacterium vaccae aids immune cells in blocking pathways that increase inflammation and the ability to combat stress.

The study's senior author and Integrative Physiology Professor Christopher Lowry described this fat as "one of the main ingredients" in the "special sauce" that causes the beneficial effects of the bacterium.

The finding goes hand in hand with the "hygiene hypothesis," initially proposed in 1989 by the British scientist David Strachan. He maintained that our generally sterile modern world prevents children from being exposed to certain microorganisms, resulting in compromised immune systems and greater incidences of asthma and allergies.

Contemporary research fine-tuned the hypothesis, finding that not interacting with so-called "old friends" or helpful microbes in the soil and the environment, rather than the ones that cause illnesses, is what's detrimental. In particular, our mental health could be at stake.

"The idea is that as humans have moved away from farms and an agricultural or hunter-gatherer existence into cities, we have lost contact with organisms that served to regulate our immune system and suppress inappropriate inflammation," explained Lowry. "That has put us at higher risk for inflammatory disease and stress-related psychiatric disorders."

University of Colorado Boulder

Christopher Lowry

This is not the first study on the subject from Lowry, who published previous work showing the connection between being exposed to healthy bacteria and mental health. He found that being raised with animals and dust in a rural environment helps children develop more stress-proof immune systems. Such kids were also likely to be less at risk for mental illnesses than people living in the city without pets.

Lowry's other work also pointed out that the soil-based bacterium Mycobacterium vaccae acts like an antidepressant when injected into rodents. It alters their behavior and has lasting anti-inflammatory effects on the brain, according to the press release from the University of Colorado Boulder. Prolonged inflammation can lead to such stress-related disorders as PTSD.

The new study from Lowry and his team identified why that worked by pinpointing the specific fatty acid responsible. They showed that when the 10(Z)-hexadecenoic acid gets into cells, it works like a lock, attaching itself to the peroxisome proliferator-activated receptor (PPAR). This allows it to block a number of key pathways responsible for inflammation. Pre-treating the cells with the acid (or lipid) made them withstand inflammation better.

Lowry thinks this understanding can lead to creating a "stress vaccine" that can be given to people in high-stress jobs, like first responders or soldiers. The vaccine can prevent the psychological effects of stress.

What's more, this friendly bacterium is not the only potentially helpful organism we can find in soil.

"This is just one strain of one species of one type of bacterium that is found in the soil but there are millions of other strains in soils," said Lowry. "We are just beginning to see the tip of the iceberg in terms of identifying the mechanisms through which they have evolved to keep us healthy. It should inspire awe in all of us."

Check out the study published in the journal Psychopharmacology.