Global Economic Convergence Is Stalling

The global economy has undergone a dramatic transformation over the past two decades, driven not least by the 2008 global financial crisis, the United Kingdom’s 2016 vote to leave the European Union, and the escalating rivalry between the United States and China. The International Monetary Fund’s latest World Economic Outlook, published this past April, shows how such shocks have affected the fortunes of emerging and advanced economies.

When then-Goldman Sachs economist Jim O’Neill coined the term BRIC in 2001, the four emerging-market economies to which he referred—Brazil, Russia, India, and China—were viewed as having enormous growth potential. Over the past quarter-century, however, progress has been highly uneven.

Start with the largest emerging economy. China’s relative economic power—measured by its GDP in current prices, relative to US GDP—peaked at 76.6% in 2021. It fell to 70.4% in 2022, owing largely to its zero-COVID policy and a real-estate downturn, and to 63.8% last year. The IMF projects it will grow slightly to 64.9% in 2027. The limitations of China’s export-dependent growth model, together with targeted US efforts to contain the country’s rise, are imposing a distinct constraint on nominal GDP growth, suggesting that, when it comes to relative economic power, we may have already seen “peak China.”

But when it comes to living standards—measured using per capita GDP, adjusted for purchasing power parity (PPP)—China continues to narrow the gap with the US. From 2021 to 2026, China’s per capita GDP relative to the US rose from 29.2% to 33.5%, with the income gap narrowing by roughly one percentage point annually. On this trajectory, China’s per capita GDP will exceed 40% of the US level by the early to mid-2030s. That would place China in the high-income category in relative terms.

By absolute measures, China will reach this milestone even sooner. It achieved a per capita gross national income of $14,230 in 2025 and is projected to reach a per capita GDP of $14,874 in 2026, well above the World Bank’s high-income threshold of $14,375. China thus appears to have avoided the dreaded middle-income trap.

India is on the opposite convergence trajectory, catching up with the US in economic scale but progressing slowly in living standards. In 2000, India was the world’s 13th-largest economy, contributing 1.4% of global GDP. By 2022, it had risen to fifth place, behind the US, China, Germany, and Japan. Although a weak rupee and GDP revisions caused India to fall behind the UK and remain in sixth place in 2025 and 2026, the country is projected to climb back up the rankings, becoming the world’s fourth-largest economy next year.

By contrast, India’s PPP-adjusted per capita GDP grew only modestly over the past decade, from 10.4% of the US level in 2016 to 13.6% this year. That is an average annual increase of just 0.3 percentage points.

Russia’s economic size relative to the US peaked at 13.6% in 2013, the year before its illegal annexation of Crimea, which prompted a spate of Western sanctions. By 2016, it had dropped to 6.8%, but it has stabilized between 7% and 8.8% over the past five years, despite the Ukraine war. Russia’s PPP-adjusted per capita GDP has also remained steady, hovering between 54.7% and 55.6% over that period.

Brazil has lost ground in both relative economic scale and living standards. Its relative GDP dropped from 16.8% of the US in 2011 to 8.7% in 2019, and it currently stands at 8.1%. Similarly, Brazil’s relative per capita GDP slid from 30.8% in 2011 to 25.9% in 2019, and it has remained around that level. South Africa, which joined the BRICS in 2010, has also experienced a persistent decline in relative income over the past decade. Both countries appear to be firmly stuck in the middle-income trap.

Major advanced economies are also losing ground to the US in terms of both economic power and incomes. Germany’s relative GDP fell from a peak of 26% in 2008 to 16.8% this year—a result of a weak euro, energy-price shocks, and declining competitiveness in the high-tech manufacturing, automotive, and semiconductor sectors. Its PPP-adjusted per capita GDP reached 97% of the US level in 2011, but it has since fallen steadily, reaching 91.1% in 2020 and 81% in 2026.

Japan, for its part, has been falling behind since the 1990s. Its relative GDP has plummeted from 74% of the US at the beginning of that decade to 13.5% this year. Over the same period, its PPP-adjusted per capita GDP shrank from 86% of the US to 63% in 2026. As for the UK, its relative economic output fell from 21.5% of the US in 2007 to 13.2% in 2026, and its relative per capita GDP fell from 81.3% in 2016 to 71.6% in 2026.

For a while, the world’s advanced economies (other than the US) were rapidly losing ground to their emerging counterparts: the GDP gap between the G7 and the BRICS contracted from 57 percentage points in 2000 to 25 percentage points in 2016, when the G7 accounted for 47.3% of global GDP, compared to 22.5% for the BRICS. The BRICS’ catch-up momentum has stalled since 2016, not because the G7 has been doing better, but because everyone has been doing worse.

Meanwhile, the US continues to outperform other major economies. Though its share of global GDP has fallen since its 2001 peak of 31.4%, it has remained above 25% over the past five years and stands just above 26% in 2026. For all the talk of global convergence, the past decade has seen America pull further ahead while most of the world has struggled to keep pace.

Project Syndicate