As I write this article, the May 2026 Beijing Summit between President Trump and President Xi Jinping is reaching its conclusion. The striking feature of this summit was that the two Presidents treated each other as co-equal partners. If anything, President Xi seemed to exude greater confidence, more authority and a larger geopolitical status than President Trump. When China’s President remarked that the two major global economic and military powers must not fall into the Thucydides trap of conflicting with each other over world leadership, this statement did not sound like a plea towards the United States, but almost a threat.
This situation would have seemed inconceivable 25 years ago, when Jim O’Neill and I were running the Goldman Sachs global international economics department. Jim directed the team to focus on a major new theme, that of long-term growth in the major economies, including many emerging economies that were normally overlooked in such exercises.
Remarkably, Jim and the Goldman team developed a thesis predicting that several major emerging economies would come to dominate global GDP growth over the following decades, eventually surpassing each of the G7 economies in size. At the time, the G7 still dominated both global output and the leading international economic institutions, including the IMF, IBRD, BIS and GATT.
In 2002, Goldman Sachs’s growth simulations looked highly optimistic, even fanciful. Yet over the following decades, several of their central conclusions were borne out, most notably the rise of China and India as the dominant engines of global growth. Since I can claim little credit for this line of work at Goldman Sachs, I am free to comment that this early set of research papers, published around the turn of the century, ranks among the most influential ever produced by an investment bank economics department.
This research was captured in the BRICS acronym. Its central claim was that a group of large developing economies (Brazil, Russia, India, China and, later, South Africa) could become the main drivers of global growth through 2050. The methodology used a supply-side model of long-term growth, combining demographic projections, forecasted capital-stock growth based on net investment and, crucially, a catch-up variable that allowed total factor productivity to converge gradually towards the levels already attained in the advanced economies.
With this five-decade period now almost exactly half complete, it is timely to assess how the major global economies have performed so far.
Table 1, panel A, shows average real GDP growth rates for the entire period, and also for three important sub periods. The standout conclusion is that the BRICS economies did indeed hugely outperform the growth rate of the PPP-weighted world as a whole, especially in the first 20 years of the period. The cumulative growth in the world economy over the three decades was 145%, while that in the BRICS was a stunning 374%. Among the five BRICS economies, all of the excess growth was attained by India (385%) and especially China (627%), while Brazil Russia and South Africa all lagged behind the global average, though they exceeded by far the growth rates of the four major developed economies at the turn of the century shown in the table, including the United States.
Table 1, panel B, shows that a similar distribution of growth rates was achieved for real GDP per capita, the most important measure used by economists for the change in real income per head (and therefore economic welfare) in different economies. Again, the cumulative growth rate in China (554%) and India (246%) stand out as truly remarkable, with cumulative growth rates around 12 times and five times the rates achieved by the United States over the same period. (Table 2 shows an early version of the Goldman forecasts released in 2003 for the period up to 2026, along with errors relative to the actual outcome for growth in that period.)
Graph 1 summarises the key sources of real GDP growth that were originally identified by the Goldman Sachs research. Between 2000 and 2009, the BRICS growth rate of 7.5% per annum was driven in the main by the large catch up in total factor productivity, and the expansion in the capital stock, rather than any gains in the labour force or human capital. This pattern was maintained in the period from 2010–19, though a gradual slowdown in the two major sources of growth produced an overall drop in the BRICS growth rate to just under 6% in that era. Finally, in the years 2022 and 2023, a sharp reduction in total factor productivity growth produced a drop in the overall BRICS growth rate to around 4.2%.
The growth drivers in China dominated all of these aggregate figures, showing that China alone accounted for a large part of the BRICS-related phenomenon throughout the period. However, India adopted an increasingly influential role in the overall story. With capital and labour growth remaining strong throughout the 25 years, India attained an increasing rate of growth over successive sub periods, even while China progressively slowed down. In the latest period from 2022–26, India grew at an average rate of 7.2% per annum, compared to “only” 4.6% in China. This was the first sub period in recent history where the Indian economy managed to become the clear leader in global growth rates among the most significant economies in the world.
Why did China slow down relative to India (and indeed relative to the United States) in the recent period from 2022-26? According to the growth decomposition from the supply side of the economy, the main source of the slowdown was total factor productivity growth, indicating that the pattern of investment spending in the China economy became less productive over time, possibly associated with over-investment in the real estate sector.
The long-term need for a redistribution of the capital stock from real estate towards manufacturing and service sectors is being aggressively addressed by the Xi administration, which is having clear successes in the rapid growth rate of industrial high technology sectors in the economy. While the real estate bubble in the mid-2010s has not caused a financial collapse similar to the GFC in the developed economies in 2008, the prolonged hangover from the housing bubble has probably slowed the overall Chinese growth rate to a much greater extent than would otherwise have occurred. Another factor, which would have resulted in slower GDP growth in any event, was that the process of Chinese catch-up towards the productivity levels already attained by the Western economies was largely over.
What about the future? It seems highly likely that India might retain the GDP growth leadership that it has achieved over China and other major economies since 2022. The key supply side factors driving Indian growth mainly remain positive. Total factor productivity still has some distance to improve to catch up with established Western and Chinese levels, though this process is disappointingly slow in India, because of infrastructure, transport and market failures. The growth of the capital stock continues to be extremely robust, as does the expansion in the labour input, both from demographic factors and from improvements in human capital (ie educational attainments). Provided that macroeconomic policy continues to be stable, and to shift further in a market friendly direction, Indian GDP growth seems capable of remaining in the 6.5% to 7% range achieved since 2010. No other major economy can come close to that.
Meanwhile, China is targeting growth of about 5% a year in the coming years, slightly above the 4.1% achieved over the past five years. That pace is achievable if rapid expansion in high-tech sectors such as solar power, batteries, semiconductors, AI and robotics can be sustained over a prolonged period.
From a supply-side perspective, that seems plausible. However, much of the demand needed to sustain these sectors comes from exports, which is widening China’s current-account surplus and sharply worsening global trade imbalances.
Associated with this development is a major undervaluation in the Chinese exchange rate, which is being maintained as a deliberate act of policy by the Chinese authorities. Arguably, the undervaluation of the RMB is among the greatest sources of global trade imbalances, and one of the greatest risks to continued global expansion. It is hard to be optimistic that this factor will be corrected soon, and it is possible that it will eventually lead to financial instability and/or further outbreaks of trade controls imposed either by the United States or even by the EU. Although global trade wars have not yet reduced the growth rate of the Chinese or even the global economy, the longer term impact of higher and unpredictable global tariff rates is certain to prove a major drag on the rate of expansion in global trade and probably GDP in coming years.
Outside of the BRICS, it is also worth commenting on possible future growth in real GDP in the United States compared to other developed economies. Over the entire period since 2000, the United States has achieved a cumulative growth rate of 2.2% per annum, compared to only 1.3% in the EA and 0.8% in Japan. According to the supply side growth decomposition shown in Graph 1, there has been a slight increase in US growth in the most recent period after 2022, driven by a rise in the capital stock and especially an increase in the labour force and in human capital.
So far, however, there has been little sign of any major change in total factor productivity growth, despite widespread optimism that the AI factor will eventually generate much greater productivity growth, not only in the United States but also in other developed economies. With immigration control now likely to lead to slower growth in the labour force, the maintenance of US real GDP growth at its recent 2.3% rate is probably dependent on a significant contribution from the AI factor. While this is so far unproven, the balance of probability seems to point strongly in favour of optimism on this front.
In a traditional BRICS framework, it therefore seems probable that China and, especially, India will continue to outpace the growth rate of the United States in coming years, although the AI factor might completely upend this conclusion. Meanwhile, there seems little scope for optimism that the EA, Japan or UK will increase their underlying growth rates relative to the United States, unless the buildup in American public debt eventually causes a crisis in the bond market and financial system. While possible, this risk has been highlighted for many years and does not seem currently to be more serious than before. The “exorbitant privilege” status of the dollar shows little sign of disappearing, despite the antics of the current administration in Washington.
Finally, I will make one more comment about the pattern and centre of gravity in world economic growth so far during this century. The map shown in Graph 2 summarises how the world centre of gravity for GDP has shifted since 1980. In line with the predictions implied by Goldman Sachs at the beginning of the century, the world economic centre of gravity (on the Danny Quah definition) has continued to move strongly and consistently from west to east, with little or no movement from north to south.
When the BRICS research was published around 2002, the global centre of gravity was somewhere near the coast of North Africa, just south of Italy. Since then, it has moved sharply towards the east, and is now to be found around on the western border of Pakistan.
According to Fulcrum estimates, shown in red on the map, there is likely to be a further shift in the global centre of gravity towards the east in the coming to decades, though the shift will happen at a much slower pace than has occurred in the past quarter-century. By 2050, the Fulcrum estimates show the world centre of gravity just outside the Chinese border – and the closest it has been to China for many centuries. While the most remarkable period of relative Chinese expansion in the global system may have already ended, the inexorable pull of economic power towards the east seems almost certain to continue.
Go east, young person!
