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China Overtakes Japan As World's Second-Biggest Economy
BBC NEWS, BUSINESS
February 14, 2011: China has overtaken Japan as the world's second-biggest economy. Japan's economy worth $5.474 trillion (£3.414 trillion) at the end of 2010, figures from Tokyo have shown. China's economy was closer to $5.8 trillion in the same period. A drop in exports and consumer demand has hit Japan, while China has enjoyed a manufacturing boom.
At its current rate of growth, analysts see China replacing the US as the world's top economy in about a decade. "It's realistic to say that within 10 years China will be roughly the same size as the US economy," said Tom Miller of GK Dragonomics, a Beijing-based economic consultancy. The US economy is currently almost three times the size of the Chinese economy in dollar terms. The UK's economy is estimated to be the world's sixth largest.
Overseas risk
Japan played down the significance of the shift in the economic league table, and the fact that it has been replaced as the second-largest economy for the first time in more than four decades. "As an economy, we are not competing for rankings but working to improve citizens' lives," said Economics Minister Kaoru Yosano. The minister added that China's booming economy was welcome news for Japan as a neighboring country. China is now Japan's main trading partner and is increasingly important to companies such as electronics firm Sony and carmakers like Honda and Toyota. However, Mr Yosano said that Japan needed to watch closely "risks from overseas economies and currency moves".
A long-running manufacturing boom and the subsequent expansion of its domestic industries and infrastructures have funded the majority of China’s growth. "There was an emphasis on infrastructure," said Duncan Innes-Ker of the Economist Intelligence Unit (EIU) in Beijing. "They were building way ahead of where people thought the demand would be. And because the infrastructure was there, companies went there."
Whole picture
Most economists agree that while China as a whole is growing, and the average person is getting wealthier, comparing only the size of its economy to Japan's does not paint an accurate enough picture. "Most people in China are still poor, more people live in the countryside than in cities," said Mr Miller of GK Dragonomics. "The average Japanese person is much richer than the average Chinese person."
The International Monetary Fund estimates that GDP per head of the population is almost $34,000 in Japan while in the People's Republic of China it is just over $7,500.
