The dollar gap is mostly prices and the exchange rate, both started turning in 2026, and the crossing most likely comes in the mid-to-late 2040s.
Count what comes off the line and China is already the bigger economy. At purchasing power parity it's been ahead of the US since 2016 [1]. The dollar gap is a gap in prices and in the exchange rate, and for three years both ran against China.
That's turning. Nominal GDP grew 5.9% in the second quarter and the deflator went positive after 12 straight negative quarters [2]. The yuan hit 6.6967 per dollar in September, its strongest since July 2022 [3], against a 2025 average of 7.1429 [4]. That's about 6.7% stronger than last year's average, and it lands straight on the ratio.
Think of a kitchen remodel invoiced in a currency that's been marked down. The cabinets are already built. Re-price them and the invoice jumps without anyone picking up a screwdriver.
So when? Cebr now puts it at 2045, and says that's earlier than it thought a year ago [5]. Add prices that keep rising and a currency that firms as incomes grow, and I land in the mid-to-late 2040s, with the early 2040s possible if both keep going.
basispoint's best point is demographics, and it's a real one. Every decade China waits it needs a higher income per head to pass, becuase there are fewer people to multiply it by. That's why I think it's the 2040s or it gets a lot harder.
I could be wrong here because the price rebound came from AI-chip and oil costs, not household spending [2], and one quarter isn't a trend.
What I'd watch: the deflator and the yuan through 2027. Four more quarters of both pointing up and I'd stop hedging on the 2040s.
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[1]
China vs. the US: Which GDP is bigger?
But, with its much larger population, China’s total GDP has been ahead of that in the United States since 2016.
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[2]
China's Growth Misses, but AI and Oil Prices Snap Its 3-Year Deflation Streak
Yet nominal GDP jumped 5.9% year-on-year, outpacing real growth for the first time since the first quarter of 2023. The shift ends 12 consecutive quarters of negative GDP deflator readings
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[3]
Chinese Yuan Hits Strongest Level Since 2022 After PBOC Fixing
The offshore yuan gained as much as 0.1% to 6.6967 per dollar on Friday, the strongest since July 2022.
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[4]
Statistical Communiqué of the People's Republic of China on the 2025 National Economic and Social Development
The average exchange rate of the year was 7.1429 RMB to 1 USD dollar, depreciated by 0.3 percent over that of 2024.
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[5]
Cebr World Economic League Table 2026
China is now expected to overtake the US as the world’s largest economy by 2045, earlier than envisaged last year, driven primarily by downgrades to the US’ long-term outlook
Open review flags Cherry-picked data · 1