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China Overtakes Japan to Become World's Second-biggest Economy
2010-07-17
Brief:China has reached another landmark by edging ahead of Japan as the world's second-biggest economy after overtaking Germany as the largest exporter.

China has reached another landmark by edging ahead of Japan as the world's second-biggest economy after overtaking Germany as the largest exporter.

The change came in the second quarter with the Japanese Cabinet Office conceding China's economy is now bigger, with gross domestic product in the period of $1.337 trillion (£851bn) compared with Japan's $1.288 trillion.

The figures are in nominal terms and in the first half of the year overall the Japanese economy was still bigger. However, economists believe China will have consolidated its new position by the end of the year despite further signs of a slowdown in its economy.

China's economy grew by 11.9pc in the first quarter and 10.3pc in the second while Japan struggled to grow with a 0.1pc GDP improvement in the April-June and 1.1pc in the first three months. The weak economic data from Japan and the US had a knock-on effect in London, where 10-year gilt yields slipped to a 17-month low, while gilt futures hit a contract high.

Some doubt China will hit forecasts of a 9.2pc rise in GDP in the third quarter and 8pc to 8.5pc in the last three months because of domestic and global pressures but even more modest growth will leave the country well placed.

There was no official comment from Beijing over the "growth league promotion" although the Shanghai stock market enjoyed its best trading so far this month with a 2.1pc rise on the day.

Economists caution that measuring growth differences on a quarterly basis between China and Japan is difficult because they do not reflect seasonal patterns. But as far as the International Monetary Fund is concerned, China overtook Japan in 2001 on the basis of purchasing power and exchange rate differences while maintaining its status as a developing nation because income per head in its 1.3bn population holds it at a 127th position in the world league.

Rapid growth and its appetite for raw materials has seen China become the biggest buyer of iron ore and copper, the second biggest importer of crude oil as well as the biggest manufacturing nation and powerhouse of the Asian economy. Last year it motored past the US to become the world's biggest car market and the largest exporter.

Economists agree China will become the world's biggest economy, the only difference is over timing.

Price water house Coopers expects it to take the top spot from the US in 2020, while Jim O'Neill, Goldman Sachs chief economist, has plumped for 2027.


Telegraph
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