CHINA’S economy will overtake that of the United States by 2035 and be twice its size by midcentury, a study released today by a US research organisation concluded.

The report by economist Albert Keidel of the Carnegie Endowment for International Peace said China’s rapid growth is driven by domestic demand more than exports, and will sustain high single-digit growth rates well into the 21st century.

“China’s economic performance clearly is no flash in the pan,” Mr Keidel said.

“Its growth this decade has averaged more than 10 per cent a year and is still going strong in the first half of 2008. Because its success in recent decades has not been export-led but driven by domestic demand, its rapid growth can continue well into the 21st century, unfettered by world market limitation.”

Mr Keidel said the rise of China to the world’s biggest economy will happen regardless of the method of calculation.

Under current market-based estimates, China’s gross domestic product is about $US3 trillion ($3.14 trillion) compared to $US14 trillion ($14.65 trillion) for the United States.

Based on a more controversial purchasing power parity (PPP) measure used by the World Bank and others to correct low labour-cost distortions, he said China’s GDP is roughly half of that of the United States.

“Despite this low starting point, if China’s expansion is anywhere near as fast as the earlier expansion of other East Asian modernisers at a comparable stage of development, the power of compound growth rates means that China’s economy will be larger than America’s by midcentury – no matter how it is converted to dollars,” Mr Keidel said.

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