China Passes Japan as Second-Largest Economy
How many mobile phone battery do you have? After three decades of spectacular growth
, China passed Japan in the second quarter to become the world's second-largest economy behind the United States, according to government figures released early Monday.
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rechargeable battery on your porcket, it can help you when needed. The milestone, though anticipated for some time, is the most striking evidence yet that China's ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.
The recognition came early Monday, when Tokyo said that Japan's economy was valued at about $1.28 trillion in the second quarter, slightly below China's $1.33 trillion. Japan's economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China's economy will race past Japan's for the full year.
Experts say unseating Japan and in recent years passing Germany, France and Great Britain underscores China's growing clout and bolsters forecasts that China will pass the United States as the world's biggest economy as early as 2030. America's gross domestic product was about $14 trillion in 2009.
"This has enormous significance," said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. "It reconfirms what's been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China's region, they're now the biggest trading partner rather than the U.S. or Japan."
For Japan, whose economy has been stagnating for more than a decade, the figures reflect a decline in economic and political power. Japan has had the world's second-largest economy for much of the last four decades, according to the World Bank. And during the 1980s, there was even talk about Japan's economy some day overtaking that of the United States.
But while Japan's economy is mature and its population quickly aging, China is in the throes of urbanization and is far from developed, analysts say, meaning it has a much lower standard of living, as well as a lot more room to grow. Just five years ago, China's gross domestic product was about $2.3 trillion, about half of Japan's.
This country has roughly the same land mass as the United States, but it is burdened with a fifth of the world's population and insufficient resources.
Its per capita income is more on a par with those of impoverished nations like Algeria, El Salvador and Albania which, along with China, are close to $3,600 than that of the United States, where it is about $46,000.
Yet there is little disputing that under the direction of the Communist Party, China has begun to reshape the way the global economy functions by virtue of its growing dominance of trade, its huge hoard of foreign exchange reserves and United States government debt and its voracious appetite for oil, coal, iron ore and other natural resources.
China is already a major driver of global growth. The country's leaders have grown more confident on the international stage and have begun to assert greater influence in Asia, Africa and Latin America, with things like special trade agreements and multibillion dollar resource deals.
"They're exerting a lot of influence on the global economy and becoming dominant in Asia," said Eswar S. Prasad, a professor of trade policy at Cornell and former head of the International Monetary Fund's China division. "A lot of other economies in the region are essentially riding on China's coat tails, and this is remarkable for an economy with a low per capita income."
In Japan, the mood was one of resignation. Though increasingly eclipsed by Beijing on the world stage, Japan has benefited from a booming China, initially by businesses moving production there to take advantage of lower wages and, as local incomes have risen, by tapping a large and increasingly lucrative market for Japanese goods.
Beijing is also beginning to shape global dialogues on a range of issues, analysts said; for instance, last year it asserted that the dollar must be phased out as the world's primary reserve currency.
And while the United States and the European Union are struggling to grow in the wake of the worst economic crisis in decades, China has continued to climb up the economic league tables by investing heavily in infrastructure and backing a $586 billion stimulus plan.
China Passes Japan as Second-Largest Economy
By: Maggie Luo
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