"He enjoys a cult of personality not seen since Chairman Mao."
This year's list, which shows 75 men and women "who make the world turn", has also pushed American president from second to third place.
Forbes explained that just one year into his term, Donald Trump "has seen limited success pushing his agenda through a Congress controlled by his own party, is under investigation by multiple law enforcement agencies, and can't shake off scandals arising from his personal and business life."
And languishing in 14th place is Prime Minister Theresa May, who dropped one position from her 13th slot in the previous year's ranking, and is five positions down from the 8th position given to her predecessor David Cameron in 2015.
Explaining May's ranking, Forbes said that after her decision to hold a snap election "backfired", she had to "guide her country through this bumpy transition government with no time to waste" before Brexit in 2019.
Well ahead of her is Angela Merkel, the chancellor of Germany and the de facto leader of Europe, named as the fourth most powerful person in the world.
She won the accolade after her success in a "hard-fought election in 2017 and created a grand coalition with political partners. She'll have to hold tight to the EU rudder as it faces oncoming storms from Brexit and growing anti-immigrant sentiment in Europe," suggests the business magazine.
Also placed above May were Pope Francis (6th), Microsoft founder and philanthropist Bill Gates (7th), Indian Prime Minister Narendra Modi (9th), Google founder Larry Page (10th) and Facebook chief executive Mark Zuckerberg (13th).
While this year's list highlights the "consolidation of power in the hands of an elite few", there are also 17 new names including Mohammed Bin Salman Al Saud (8th place), the Crown Prince of Saudi Arabia, known as "MBS".
He has consolidated power and, aside from taking control of the country, launched an anti-corruption campaign in November 2017 which resulted in the arrest of many prominent Saudis, who were forced to turn over their fortunes.
"The crown prince will be the fulcrum around which the Middle Eastern geopolitics moves for the next generation," said Forbes.
So how does the magazine compile its annual list? It looked at hundreds of candidates, and asked whether they had power over lots of people. Pope Francis, for example, who is ranked sixth, is the spiritual leader of more than a billion Catholics.
Doug McMillon, in 23rd place, is the CEO of the world's largest private employer, Wal-Mart Stores, with more than 2.3 million workers around the globe.
Forbes then assessed the financial resources controlled by each person. Are they relatively large compared to their peers? For heads of state it used GDP, while for CEOs, the magazine looked at the company's assets and revenues.
"Then we determined if the candidate is powerful in multiple spheres. There are only 75 slots on our list – one for approximately every 100 million people on the planet– so being powerful in just one area is often not enough.
"Our picks project their influence in myriad ways: Elon Musk (ranked 25th) has power in the auto business through Tesla Motors, in the aerospace industry through SpaceX, because he's a billionaire, and because he's a highly respected tech visionary", Forbes explained.
Lastly, it made sure that candidates "actively" use their power. North Korean dictator Kim Jong-un (in 36th place) has near absolute control over the lives of the 25 million people who live in his country, and is known to punish dissent with death.
Individual rankings were averaged into a composite score: "This year's list comes at a time of rapid and profound change, and represents our best guess about who will matter in the year to come," Forbes added.
Forbes' top 20 world's most powerful people in 2018:
1. Xi Jinping, President of China
2. Vladimir Putin, President of Russia
3. Donald Trump, President of the United States
4. Angela Merkel, Chancellor of Germany
5. Jeff Bezos, CEO and founder of Amazon
6. Pope Francis, Roman Catholic Church
7. Bill Gates, founder of Microsoft
8. Mohammed bin Salman Al Saud, Crown Prince of Saudi Arabia
9. Narendra Modi, Prime Minister of India
10. Larry Page, co-founder of Google
11. Jerome H. Powell, Chair of the Federal Reserve
12. Emmanuel Macron, President of France
13. Mark Zuckerberg, CEO and co-founder of Facebook
14. Theresa May, Prime Minister of Britain
15. Li Keqiang, Premier of China
16. Warren Buffett, CEO of Berkshire Hathaway
17. Ali Hoseini-Khamenei, Supreme Leader of Iran
18. Mario Draghi, President of the European Central Bank
19. Jamie Dimon, CEO of JPMorgan Chase
20. Carlos Slim Helu, CEO of Telmex, América Móvil, and Grupo Carso
