China is set to overtake Japan as the second largest economy in the world in a resurgence that is changing everything from the global balance of military and financial power to how cars are designed.
China’s GDP in 2009 was $4.98 trillion and Japan’s was $5.07 trillion. In 2010, China’s GDP was $1.335 trillion for the April-June quarter – a period for which Tokyo has yet to report. China is growing at 10% a year while Japan’s expansion this year is forecast at no more than 3%.
“On that basis, the crossover probably happened last quarter,” said Julian Jessop, chief international economist for Capital Economics in London.
China came close to surpassing Japan in 2009. It technically overtook Japan as the second largest economy in the world in the fourth quarter of 2009 since China produced more goods and services than did Japan.
China is already the biggest exporter, auto buyer and steel producer, and its worldwide influence is growing. The fortunes of companies from Detroit automakers to Brazilian iron miners depend on spending by China’s consumers and corporations. Chinese pressure helped to win developing countries a bigger voice in the World Bank and International Monetary Fund.
If China can maintain 5% growth per year in the 2020s, it will have maintained growth for 50 years that would be unprecedented in history.
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 G20, which since the 2008 financial crisis has become the world’s premier economic policy-setting forum.
The rise of China wasn’t new, either, of course. But the speed at which the shift is taking place, and the fact that China has remained so stable and prosperous during the financial crisis has called into question Japan’s export-based growth model. China is moving up the food chain faster than anyone thought possible, and even beginning to challenge Japan at the very core of its economy: high-end manufacturing.
China mostly still exports low priced goods to the West, but the government has made it clear that they want to go for higher-end goods and have been offering subsidies to more innovative companies, payments for patent filings, and all sorts of tax breaks and supports to entrepreneurs in areas like green technology and energy-efficient cars and fuels
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