China's $5.88tn GDP overtakes Japan with US in sights for 2025
CHINA has overtaken Japan to become the world's second-largest economy behind the United States -- the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty.
China's $5.88 trillion (€4.36 trillion) gross domestic product surpassed Japan's $5.47tn in 2010, the cabinet office in Tokyo said yesterday.
Japan's economic and fiscal policy minister Kaoru Yosano said China's expansion was a "welcome development".
Japan's GDP fell less than estimated in the fourth quarter in a contraction that may prove temporary as overseas demand revives production.
The annualised 1.1pc drop in GDP in the three months through December was driven by a slowing in exports and fading of government stimulus programs, cabinet office figures showed. China's GDP surged 8.9pc.
"This was just a temporary contraction and growth may accelerate more than investors anticipate this quarter and next," said Kyohei Morita, chief economist at Barclays Capital in Tokyo, who forecast a 1.3pc decline.
"The export decline was smaller than expected and shipments will keep expanding as long as Asia's economies continue to boom," he added.
Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the number one spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others.
China came close to surpassing Japan in 2009 and overtaking Japan in 2010 was long expected.
Cruising past Japan might give China bragging rights, but its per-capita income of about $3,800 a year is a fraction of Japan's or America's.
"China is still a developing country, and we should be wise enough to know ourselves," said Yi Gang, China's chief currency regulator, when asked whether the time was ripe for the yuan to become an international currency.
China's economy expanded by 11.1pc in the first half of 2010, from a year earlier, and is likely to log growth of more than 9pc for the whole year, according to Mr Yi.
China has averaged more than 9.5pc growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Mr Yi said.
If China could chalk up growth this decade of 7-8pc annually, that would still be a strong performance. The issue was whether the pace could be sustained, Mr Yi said, not least because of the environmental constraints China faces.
In an assessment disputed by Beijing, the International Energy Agency said last week that China had surpassed the United States as the world's largest energy user.
The uninterrupted economic ascent, which saw China overtake Britain and France in 2005 and then Germany in 2007, is gradually translating into clout on the world stage.
China is a leading member of the Group of 20 rich and emerging nations, which since the 2008 financial crisis has become the world's premier economic policy-setting forum. (Reuters/Bloomberg)