The latest buzz is the expected overtaking of Japan by China as the world’s number two economy some time in 2010. I’ll ignore the more polarizing perspectives from the likes of CNN and the NYT. Here are some decent takes on this “news”: Bloomberg, BBC (video), and Japan Today).
(I have recently subscribed to the power of “multi-sourcing,” thanks to Newsy. See my previous article, “Newsy.com, breaking the mold of Western media bias?“)
As reported in Xinhua News, I think the most important aspect of this story is really the per capita of $3,600.00 in China vs. the $39,000.00 in Japan. The ratio of real wealth is 1 to 10, and China’s population is actually 10 times bigger than Japan’s. If the world has humanity, it should hope for continued stable development and that China’s per capita GDP catches up to Japan’s $39,000.00. In the article below, Xinhua writers explain why China is not that excited about surpassing Japan as world’s number 2 economy:
What does it imply after China becomes world’s No. 2 economy?
English.news.cn 2010-08-03 23:46:19
by Xinhua writers Wu Liming, Ye Shuhong
BEIJING, Aug. 3 (Xinhua) — A deputy governor of China’s central bank recently unveiled a major economic milestone in a rather casual manner.
“China is actually now already the world’s second-largest economy,” Yi Gang, who is also head of the State Administration of Foreign Exchange (SAFE), said in an interview posted on the SAFE website last Friday.
The milestone was an expected accomplishment, as it has been a consensus shared among economists, politicians and the media that China would sooner or later become the world’s second largest economy. The only question was when the milestone would occur.
Following Yi’s remark, some media lauded China’s leaping forward and to a certain extent, exaggerated its significance.
Of course, becoming No. 2 in the world is a milestone earned after decades of hard work by the Chinese people.
Thanks to the reform and opening-up policy, China has experienced uninterrupted economic ascent over the past three decades, overtaking Britain and France in 2005, Germany in 2007, and now Japan.
However, it is also important to ask ourselves what it really implies to become the “world’s No. 2 economy,” and then stay cool.
After all, China’s per-capita gross domestic product (GDP) is still far behind that of many other countries including, of course, Japan.
According to the World Bank, China’s per capita GDP was a bit more than 3,600 U.S. dollars in 2009, ranking 124th worldwide, whereas Japan’s per-capita GDP amounted to over 39,000 dollars.
Indeed, China’s current per capita GDP is equal to only that of Japan in 1973, which was at around 3,800 U.S. dollars.
Analysts forecast it would be not until 2050 that China’s per capita GDP reaches the 2009 level of the per capita GDP of developed countries.
In short, China has a long way to go.
“China is still a developing country, and we should be wise enough to know ourselves,” Yi has said.
With an economic structure far from perfect, China still faces numerous challenges, such as additional work on the balance of its development and the growth of its scientific innovations and high value-added industries.
China is obviously behind Japan in the process of economic development. The shares of agricultural, industrial and service industries in Japan’s overall economic pie stand at 2 percent, 30 percent and 69 percent, respectively. That compares with China’s 12 percent, 48 percent and 40 percent.
Japan draws its strength from high-tech and high value-added industries, whereas many of China’s industries are labor intensive.
Gross national product (GNP) can often be a better gauge of the overall economic strength of a nation. Statistics show that China’s GNP was around 4,129 billion U.S. dollars, while that of Japan was more than 5,751 billion dollars. China is even farther behind in per capita GNP.
China has to re-adjust its economic structure and change the models of development to have growth quality and efficiency, Yi said.
We should also beware of the pressure and demand on China for unrivaled responsibilities advanced by certain media and politicians, who have spoken loudly about China’s overall economic size.
Several western media recently slapped China on energy consumption,emissions and what they see as an exchange rate policy issue. They also demanded that China take on more political and international responsibilities, such as climate control, that are beyond the country’s capacity.
By exaggerating China’s rise, some are also attempting to stir up the concerns or even hostility of neighboring countries against China.
GDP is never the only gauge of a country’s economic strength, and therefore is not a justified measure of responsibilities either.
The rise of the Chinese economy poses no threat to the global economy. Instead, it brings more benefits and opportunities to the world at large.
ViVek Arora, the IMF’s chief representative in China, has said that since the world economic crisis in 2008, China has made the biggest contribution of any single economy to global economic growth.
The biggest developing country, China has actively taken on its due responsibilities. It has provided huge assistance and help to other developing countries, especially less-developed countries.
A prosperous Chinese market also provides more opportunities for the global economy, its neighbors in particular.
On Jan. 1, the Free Trade Area agreement between the Association of Southeast Asia Nations (ASEAN) and China took effect, boosting trade and economic cooperation between the two sides.
In the first half of this year, trade between China and the ASEAN surged 55 percent to 136.5 billion U.S. dollars.
The Moscow-based weekly The View has a keen observation on China’s economic growth.
“It is wise for China to recognize that it still remains a developing country,” the newspaper said.
Stuart Staniford has an interesting post on this topic, “ Global Market Shares,” mainly in response to Michael Pettis’ most recent article, “Chinese consumption and the Japanese “sorpasso”.”
Staniford visualizes China’s share of the global GDP, comparing with that of the U.S., the E.U., Japan, and India. He also makes a point about China’s cheap labor to debunk Pettis’ comparison with Japan where Japan’s global share of GDP dramatically declined.
The most self-defeating thing for China to do would be to believe its own publicity and in official statements at least, it has downplayed the achievement.
Contrast this with Japan when it arrived at the same point (No 2 economy) in the 1980s, and some believed that No 1 position was within striking distance.
Somewhere inside a Tokyo vault lies the world’s most expensive painting of a pot of sunflowers; not to mention the losses from fire-sales of over-priced American icon buildings.
Maybe the collective flaunting was to ameliorate the shattering loss of confidence the nation had taken in defeat 40 years ago, and validate its peerdom with former enemies.
Instead, Japan has found itself defeated again, with its currency forced up and caught in the endaka trap ever since.
The lesson should be well-learnt for the new incumbent.
Besides, such titles like No 2 or No 1 mean nothing if they don’t filter down to the man in the street. The important thing is that the average person feels that life can get better and, despite discontent with issues such as the money gap, official wastage, etc, at least the people spoken to feel optimistic,