SHANGHAI/LONDON: China is expected to leapfrog the US to become the world's largest economy in 2014, at least in terms of purchase power parity, a white paper from Euromonitor International has forecast.

It predicted that the two countries will account for 37.5% of global real GDP growth up to 2030 and that China will add US$18,026bn in GDP over that period – equivalent to the size of Western Europe – while the US will add $US8,658bn.

However, there remain important differences between the two countries, with China lagging significantly in key areas, such as income and consumer expenditure. Also, even in 2030, per capita GDP in China will still be less than half that of the US.

The report found China's large population is gradually beginning to fulfil its mobile potential on the back of rising incomes as well as greater affordability of services and devices.

And China is rapidly catching up with the US in terms of research, development and patents – total patent grants stood at 256,943 in 2013, up from 93,706 in 2008, and compares with the 264,960 patents granted in the US.

In terms of consumer expenditure, Euromonitor found China's per capita gross income was 10.5 times lower than that of the US in 2013, yet was surprised that its per capita savings rate was only 2.7 times less.

China is expected to remain a nation of savers, the report said, and the country's savings ratio will remain high, at more than a third (35.7%) of disposable income in 2030.

It concluded this showed Chinese consumers are not spending enough, especially as much of the country's growth, unlike in the US, is mainly investment driven.

Even by 2030, consumer expenditure will account for less than half (40.9%) of total Chinese GDP, the report said, meaning it will not be a driver of growth.

But with China likely to surpass the US this year in terms of overall economic size, Euromonitor described the development as an "economic milestone".

"This year is a landmark year for the world economy, one when the dominance of the USA appears to be over as China becomes the world's largest economy," said Sarah Boumphrey, head of strategic, economic and consumer insight, Euromonitor.

"Taken together, the two economies play a crucial role in driving global growth. A strong China in conjunction with a strong USA, whichever is nominally the larger of the two, is central to a stable, well-functioning global economy," she added.

Data sourced from Euromonitor International; additional content by Warc