China will overtake the United States to become the world's largest economy by 2038 if current growth rates continue, according to Professor Shujie Yao, Head of the new School of Contemporary Chinese Studies at The University of Nottingham.

Giving his inaugural lecture at the University, Professor Yao said that China's GDP (gross domestic product) would overtake that of Japan by 2017 or 2018 and Germany's by next year.

But these were conservative scenarios based on nominal exchange rates, he said. If purchasing power parity was used instead, China would overtake the United States much sooner.

Addressing the question of whether China would become a superpower, he said that the economic reforms over the past 30 years, which were still continuing, constituted the biggest project in human history.

He said China had pursued a gradual, pragmatic approach to reform, taking maximum advantage of foreign investment to build its exports and selectively importing science and technology to stimulate its own domestic development. This model had proved highly successful and was an example for other developing nations to follow.

A host of factors could constrain China's ability to become a superpower in the future, including limited supplies of energy and raw materials, questions over its innovation capability, inequality and corruption, risks to social stability and the environment and its choice of political system.

The government had adopted a series of strategies to deal with these problems, and there were different views on how successful Beijing would be. Under a pessimistic scenario, growth could slow, causing high unemployment, with corruption and inequality provoking social unrest amidst an energy crisis or financial crisis, in turn leading to an unstable, polarised and stagnant society.

But under an optimistic scenario, the high growth economy would continue, he said, with science and technology resolving the problems of energy and resource shortages, leading to a much improved quality of life for China's 1.3 billion people and big reductions in poverty and inequality. Under such a scenario, China could become a real superpower in 30 years time, he concluded.

Professor Yao holds the chair in Chinese Economics and Sustainable Development at the School of Contemporary Chinese Studies and the China Policy Institute at The University of Nottingham.

The new School was established on January 1, to incorporate the previous Institute of Contemporary Chinese Studies and house the China Policy Institute, a thinktank on China established in 2003 to raise the level of understanding of China in the UK.

Professor Yao has extensive consultancy experience with organisations including the World Bank, Asian Development Bank and the European Union. His career has included academic appointments at Oxford, Portsmouth and Middlesex Universities.

He is now head of The University of Nottingham's new School of Contemporary Chinese Studies — the first of its kind in the UK to focus solely on the study of contemporary China.

It aims to become the best centre for research, teaching and policy analysis on contemporary China in the UK and Europe and plans to attract the most talented staff and students. The school will offer a stimulating research environment spanning expertise in the fields of the social sciences, humanities and policy analysis and build the China Policy Institute into a world class policy thinktank on China.

It will also ensure that contemporary Chinese studies research, teaching and policy opportunities linked to the University's pioneering campus in Ningbo are fully exploited both in China and Nottingham.

Professor Yao said: “This is an exciting period in which to develop the School of Contemporary Chinese Studies and to focus on research aimed at a better understanding of China.

“We are keen to train the next generation of China academics, explore the opportunities that arise from China's emergence and face up to the challenges that may be posed by China's rise as a superpower.”