Goldman Sachs has upgraded its forecast for China's economic growth, predicting it will overtake America to become the world's biggest economy in 2027 — 14 years earlier than expected.

The US investment bank calculates China's gross domestic product will hit $5.4 trillion (£3.2 trillion) a year by 2010 — up more than $1.1 trillion in dollar terms since the end of 2008 — at a time when most Western economies have been flat lining.

Writing exclusively for the Evening Standard, Goldman's chief economist Jim O'Neill said: “When we first suggested back in 2003 that China could possibly challenge the US to be the world's number one by 2041, many thought it was a pipedream, and had virtually no chance. In fact, it is possible a lot sooner, and indeed, we now think it could happen within 20 years — in fact 2027 to be precise, so 18 years.”

China, the world's third-largest economy, is on course to usurp Japan next year after its GDP more than trebled in value between 2001 and 2008 from $1.3 trillion to $4.3 billion.

“Its rise in that short space of time has been the equivalent to creating nearly two new Britains in seven years,” he said.

He added that London is well-placed to benefit because of the City's time zone between Asia and America and the fact English is the international language of business and the internet.