China overtakes Japan as world's second-largest economy

[General Duke]

China overtakes Japan as world's second-largest economy• Japan's economy grew just 0.4% a year in second quarter

 

• Figures spark concern over cooling demand in Asia

 

• Japan facing ageing population and a strong yen

 

guardian.co.uk, Monday 16 August 2010 09.11 BST Article history

 

Japanese consumer spending, which accounts for about 60% of GDP, was flat in the second quarter Photograph: Junji Kurokawa/AP

 

Japan lost its place as the world's second-largest economy to China in the second quarter as receding global growth sapped momentum and stunted a shaky recovery.

 

Gross domestic product grew at an annualised rate of just 0.4%, the Japanese government said today, far below the annualised 4.4% expansion in the first quarter. The news added to evidence that the global recovery is facing strong headwinds.

 

The figures underscore China's emergence as an economic power that is changing everything from the global balance of military and financial power to how cars are designed. It is already the biggest exporter, car buyer and steel producer, and its global influence is growing.

 

China has been a major force behind the world's emergence from recession, delivering much-needed juice to the US, Japan and Europe. Tokyo's latest numbers, however, suggest that Chinese demand alone may not be enough for Japan or other economic giants.

 

"Japan is the canary in the goldmine because it depends very much on demand in Asia and China, and this demand is cooling quite a bit," said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. "This is a warning sign for all major economies that just focusing on overseas demand won't be sufficient."

 

China has surpassed Japan in quarterly GDP figures before, but this time it is unlikely to relinquish the lead.

 

China's economy will almost certainly be bigger than Japan's at the end of 2010 because of the huge difference in each country's growth rates. China is growing at about 10% a year, while Japan's economy is forecast to grow between 2% and 3% this year. The gap between the size of the two economies at the end of last year was already narrow.

 

Japan's nominal GDP, which is not adjusted for price and seasonal variations, was worth $1.286 trillion (£823bn) in the April-to-June quarter compared with $1.335 trillion for China. The figures are converted into dollars based on an average exchange rate for the quarter.

 

Japan has held the No. 2 spot after the US since 1968, when it overtook West Germany. From the ashes of second world war, the country rose to become a global manufacturing and financial powerhouse. But its so-called "economic miracle" turned into a massive real estate bubble in the 1980s before imploding in 1991.

 

What followed was a decade of stagnant growth and economic malaise from which the country never really recovered. Prime minister Naoto Kan now faces a long list of daunting problems: a rapidly ageing and shrinking population, persistently weak domestic demand, deflation, a strong yen and slowing growth in key export markets.

 

In contrast, China's growth has been spectacular, its voracious appetite fuelling demand for resources, machinery and products from the developing world as well as rich economies such as Japan and Australia. China is Japan's top trading partner.

 

China's rise has produced glaring contradictions. The wealth gap between an elite who profited most from three decades of reform and its poor majority is so extreme that China has dozens of billionaires while average income for the rest of its 1.3 billion people is among the world's lowest.

 

Japan's people still are among the world's richest, with a per capita income of $37,800 last year, compared with China's $3,600. America, still by far the largest economy, has a per capita income of $42,240.

 

"We should be concerned about per capita GDP," said Kyohei Morita, chief economist at Barclays Capital in Tokyo. China overtaking Japan "is just symbolic," he said. "It's nothing more than that."

 

But the symbolism may be exactly the "wake-up call" Japanese leaders need, said Schulz of the Fujitsu Research Institute. "Japan is always strangely inward looking," he said. "And nobody is doing anything about it."

 

Japan's people appear resigned to the power shift. A national poll conducted this year by the Asahi, one of Japan's biggest newspapers, showed a roughly equal split between those that believed Japan's fall to the third-largest economy posed a major problem and those who did not. More than half of the 2,347 respondents said Japan does not need to be a global superpower.

 

The country's annualised growth in the second quarter was also sharply below expectations of 2.3% in a Kyodo news agency survey of analysts. On a quarterly basis, Japan's GDP – or the total value of the nation's goods and services – grew 0.1% from the January-March period, the Cabinet Office said.

 

Consumer spending, which accounts for about 60% of GDP, was flat from the previous quarter, the figures showed. Capital spending by companies rose 0.5%, while public investment fell 3.4%.

 

The outlook for the third quarter is uncertain. Private consumption appears to be solid so far, helped in part by unusually hot weather, said Masamichi Adachi, senior economist at JP Morgan Securities Japan. But the slowing global economy is weakening exports and production.

 

A stronger yen, which hit a 15-year high against the dollar last week, also poses a major risk for the country's export-driven economy. Yen appreciation reduces the value of repatriated profits for companies such as Toyota and Sony and makes their products more expensive abroad.

 

The currency worries led finance minister Yoshihiko Noda to say last week that he is closely monitoring foreign exchange rates. Masaaki Shirakawa, governor of the Bank of Japan, released a similar statement to try to calm markets.

[General Duke]

China's economy passes Japan's as world's second-largest

16 Aug 16, 2010 - 9:59:41 AM

 

The milestone comes as Japan has been stunted by weak consumer spending and lower corporate investment. It is a highly anticipated milestone for China, a developing country that began market reforms in 1978, gradually shedding state control and laying the foundation for a manufacturing and export powerhouse.

 

China's economy surpassed Japan's as the world's second-largest – a highly anticipated milestone rich in symbolism for a developing country that began market reforms only three decades ago.

 

The news came Monday when Japan's government said its economic output in the second quarter slowed to $1.28 trillion, which is short of the $1.33 trillion China reported over the same period.

 

Though China's economy bested Japan's output before in the fourth quarter of last year, economists say China is poised to be ahead for good as Japan's economy struggles to recovery from the financial crisis.

 

Japan has been stunted by weak consumer spending and lower corporate investment. Though China's economy has slowed in recent months from its most torrid expansion, many economists expect it to maintain high growth rates as the country continues to urbanize.

 

"China's population is 10 times the size of Japan's and China's growth was more than 10% last year," said Masamichi Adachi, JP Morgan's senior economist in Tokyo. "Japan's economy has been sluggish. So it was inevitable that China would overtake Japan.

 

Still, the achievement was hard to fathom when the Chinese government introduced economic reforms in 1978, gradually shedding state control and laying the foundation for a manufacturing and export powerhouse.

 

Today, China's demand for energy and raw materials helps dictate global supply and demand. Coupled with its mass holdings of foreign reserves and debt, Beijing's international clout — whether it admits it or not — has risen to new heights. It has also irked trading partners by keeping its currency cheap to boost its trade sector.

 

China's economic ascendance has been fueled largely by the sheer size of the nation. Its population of 1.3 billion people has helped build it into the world's No. 1 automobile market and the largest exporter.

 

Yet the paradox remains that many Chinese are still poor compared to the economies it has so quickly overtaken.

 

China's per capita gross domestic product is still more than 10 times smaller than Japan's and 12.5 times smaller than the United States', whose economy China is predicted to surpass in a decade or so to reach No. 1.

 

In the coming years, China faces the challenge of having to reform its economy toward greater domestic consumption over foreign demand. The nation also confronts the ever-present threat of environmental catastrophe that could derail its development.

 

Some economists worry China's new ranking will shift attention away from the delicate work ahead.

 

"It is high time for China to keep its head cool and shift its focus from the pursuit of mere GDP figures to the quality of its growth pattern," said Liu Baocheng, a professor at the University of International Business and Economics.

 

In the near term, policymakers are searching for new growth drivers after allowing a record amount of bank lending in 2009. The result of that has been massive infrastructure investment and a sizzling real estate market that the government has been forced to cool over fears of rising debt and social discontent.

 

"I think China is doing a lot to catch up to advanced countries but you have to recognize that the Chinese government doesn't want radical change in terms of its currency and trade," Adachi said. "They still wanted to be treated like a developing economy. One day they will have to change."

 

david.pierson@latimes.com

 

Copyright © 2010, Los Angeles Times

[Nin-Yaaban]

Good for them, and in ten yrs (2020) they'd overtake the U.S. Atleast they wouldn't invade countries just so they could steal their resources. I'd trust the Chinese over Americans anyday.

[General Duke]

^^^The Chinese miracle is an example to the developing world.

[N.O.R.F]

^Propped up by slave like conditions for it's factory works who earn a pittance and work in hazardous conditions. Cheap goods on mass production during a financial crisis has helped get them here. I would still buy Japanese or South Korean products over Chinese anyday. You need things working for more than 6 months

[Naxar Nugaaleed]

the per capita GDP of japan is around 33,000 dollars, china's is 3000, quite a difference and if you ask me, 3000 is like a third world standard of living.

[Som@li]

The economy growth in China is amazing,

 

Who live in the so called

?

[Som@li]

Countries like India are democratic, and got too much bureaucracy, which is holding back.

 

China's model of government is favorable for some countries.

[General Duke]

Originally posted by N.O.R.F:

^Propped up by slave like conditions for it's factory works who earn a pittance and work in hazardous conditions.

You dont know much about history, waryaa go read a Peoples History of United States, and see how the "greatest nation" on Earth was built.

 

China is developing, but no one can doubt it is the future.. No nation in human history has brought so many people out of dire poverty in such little time. Its the new super power, and its growth will help Africa.

[General Duke]

World No. 2 economy 'still developing', says China

 

By Susan Stumme (AFP) – 7 hours ago

 

BEIJING — China on Tuesday hailed the country's economic might after it overtook world number two Japan in the second quarter but said it still had tens of millions of people living in poverty.

 

Thirty years after opening its doors to the world, China has claimed the titles of world's biggest exporter, auto market and steelmaker in recent years.

 

Many expect China will this year become the world's number two economy, just behind the United States -- taking the title Japan has held for 40 years and underscoring its emergence as an economic force.

 

While China has for years stormed ahead with double-digit expansion in gross domestic product, Japan's growth rates have been comparatively low.

 

On Monday, Japanese data showed that while Tokyo stayed ahead of its Asian rival in the first half, its second-quarter GDP was smaller than China's.

 

But a commerce ministry official pointed out that in per capita terms, China lags far behind its rivals, and has a long way to go to becoming a world-class power.

 

"We should not only care about GDP data but also more importantly should pay attention to the per capita figures," commerce ministry spokesman Yao Jian told reporters at a regular briefing.

 

He said China's per capita GDP was 3,800 dollars, around 105th in the world, and added that 150 million of the country's 1.3 billion people live below the poverty line, according to UN standards. Japan's per capita GDP is more than 10 times that of China.

 

"The quality of China's economic growth still needs to be improved, no matter whether it is in terms of people's quality of life or in terms of science, technology and environmental protection," the spokesman said.

 

"We still have an enormous gap to make up."

 

The country's newspapers insisted that China, while contributing to global growth and helping to drive the world's recovery from the financial crisis, was still transforming itself into a world-class economic power.

 

"China's economic strength is also still at the level of a developing nation. So the world's second-largest economy is not the equivalent of the second-largest economic power," the People's Daily said in a commentary.

 

In just three decades, China has leapfrogged Britain, France and Germany on its economic ascent and has won developing countries a bigger say in the World Bank and International Monetary Fund.

 

However, the official China Daily said in an editorial: "The Chinese economy still has a lot more room to grow and can contribute even more to the global recovery.

 

"But for those who expect China to assume greater international responsibilities just because of the size of its economy, they should take a hard look at the enormous development challenges that the country still faces."

 

A columnist for the People's Daily, Li Hong, offered an optimistic outlook, claiming China could overtake the United States in 15-25 years.

 

"Our ultimate goal is, naturally, to reach the pinnacle by surpassing the United States and, once again, becoming the largest economy," Li wrote in the paper, the mouthpiece of the ruling Communist party.

[N.O.R.F]

Originally posted by General Duke:

quote:Originally posted by N.O.R.F:

^Propped up by slave like conditions for it's factory works who earn a pittance and work in hazardous conditions.

You dont know much about history, waryaa go read a Peoples History of United States, and see how the "greatest nation" on Earth was built.

 

China is developing, but no one can doubt it is the future.. No nation in human history has brought so many people out of dire poverty in such little time. Its the new super power, and its growth will help Africa.

Fair enough. Just don't buy a Chinese TV

[General Duke]

^^^I dont plan to any time soon.