After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.
The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.
The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.
From France 24:
Also, from MarketWatch: “China now No. 2, but still desperately poor.”
For Forbes Gady Epstein puts this news in context:
We already know that China is the world’s second economic center of gravity now after the U.S., and in important ways is the dominant center of gravity: It has long been the economy that draws every big company in the world seeking growth, and which sets global markets in most commodities, as the New York Times story points out. When China, growing as quickly as it does, becomes a net importer of something, that is the vital turning point for prices going forward, and it didn’t take until the second quarter of 2010 for this to become true. This has been true for most of the last decade.
There are at least two more reasons not to get too excited. One is minor, which is that in truth, we don’t have a clear picture of China’s real economic output. The quality of data coming out of the economy remains poor. As one very smart, rigorous analyst of China’s economy told me last week — unfortunately I can’t use his name — we don’t really know the actual GDP even within a modest margin of error, we just have to sort of hope the official numbers are in the right ballpark. That means we don’t really know when China’s economy surpasses Japan’s in reality, just when the official numbers say so.
The poor quality of data is an important issue for Chinese policymakers, but I consider this a minor point in this particular context because it doesn’t change what I’ve written above. China’s world-changing gravitational pull as an economy is undeniable, no matter the economy’s actual size, and what happens to the Chinese economy in the coming months and years is of more importance to the rest of us than what happens to the Japanese economy. This, too, has been true for quite some time.