Monday, 16 August 2010

China GDP Surpasses Japan, Capping Three-Decade Rise

Here is an article from Bloomberg today which might interest you.




China GDP Surpasses Japan, Capping Three-Decade Rise (Update1)

2010-08-16 08:12:05.77 GMT



By Bloomberg News

     Aug. 16 (Bloomberg) -- China surpassed Japan as the world's

second-largest economy last quarter, capping the nation's three-

decade rise from Communist isolation to emerging superpower.

     Japan's nominal gross domestic product for the second

quarter totaled $1.288 trillion, less than China's $1.337

trillion, the Japanese Cabinet Office said today. Japan remained

bigger in the first half of 2010, the government agency said.

     China led the world out of last year's global recession

with an economy that's more than 90-times bigger than when

leader Deng Xiaoping ditched hard-line Communist policies in

favor of free-market reforms in 1978. The country of 1.3 billion

people will overtake the U.S., where annual GDP is about $14

trillion, as the world's largest economy by 2027, according to

Goldman Sachs Group Inc. chief economist Jim O'Neill.

     China's surpassing of Japan "is a marker of its

increasingly dominant role in the global economy," said Eswar

Prasad, a senior fellow at the Brookings Institution and former

head of the China division at the International Monetary Fund.

"The resilience of China's growth during the crisis enabled a

number of other countries, particularly commodity-exporting

economies, to ride on its coattails."

     The benchmark Shanghai stock index rose 2.1 percent at the

3 p.m. close today, climbing the most this month.


                         Tricky Comparison


     China overtook the U.S. last year as the biggest automobile

market and Germany as the largest exporter. The nation is the

world's No. 1 buyer of iron ore and copper and the second-

biggest importer of crude oil, and has underpinned demand for

exports by its Asian neighbors.

     While China's output was also larger in the fourth quarter

of 2009, Japan's GDP rebounded to exceed China's in the first

quarter, according to data compiled by Bloomberg News. According

to IMF data using purchasing-power-parity calculations to adjust

for exchange-rate differences, China overtook Japan in 2001.

     Quarterly comparisons between China and Japan are "a

little tricky because they do not take account of different

seasonal patterns between the two countries," said David Cohen,

head of Asian forecasting at Action Economics in Singapore.

     China's economy is cooling as the government trims credit

growth from last year's record $1.4 trillion and discourages

multiple-home purchases to cool surging property prices. July

industrial output rose the least in 11 months, retail sales

growth eased and new loans climbed less than estimated. China

Petroleum & Chemical Corp. said last month that its crude-oil

processing increased at a slower pace in the second quarter as

fuel demand faltered.


                         Property Collapse


     The country's property market is beginning a "collapse"

that will hit the nation's banking system, Kenneth Rogoff, a

Harvard University professor and former chief economist of the

IMF, said July 6.

     Still, China is on course to overtake the U.S. as the

world's largest economy around 2020, PricewaterhouseCoopers said

in a January report.

     With China's growth surging 10.3 percent in the second

quarter from a year earlier and Japan expanding 2 percent, the

"gap is going to widen" in future, said Shen Jianguang, a Hong

Kong-based economist at Mizuho Securities Asia Ltd. "It is not

likely that Japan will retake the No. 2 spot given the likely

growth rates."

     Four of the world's top 10 companies by market

capitalization are from China, including PetroChina Co.,

Industrial & Commercial Bank of China Ltd., China Mobile Ltd.

and China Construction Bank Corp.


                         Agricultural Bank


     Agricultural Bank of China Ltd. boosted the size of its

initial public offering to $22.1 billion this month after

selling more stock in Shanghai, making it the world's largest

first-time share sale. The IPO made the nation home to four of

the world's 10 biggest banks by market value, half a decade

after the country's first major state-owned lender went public.

     China may be the biggest IPO market in 2010 as companies

are likely to raise 500 billion yuan ($74 billion) in Shanghai

and Shenzhen, PricewaterhouseCoopers forecast last month.

     Since introducing free-market policies, China has lifted

300 million citizens out of poverty, according to the United

Nations. The country remains a developing nation, with its per

capita gross national income ranked 127th in the world at $2,940

at the end of 2008, behind Angola and Azerbaijan, according to

the World Bank.


                         Cultural Revolution


     In the first three decades of Communist Party rule before

Deng took power, China's economy was hobbled by the chaos of the

Great Leap Forward, a failed attempt to transform the agrarian

nation into an industrial powerhouse, and the Cultural

Revolution, a decade of political upheaval led by Mao Zedong's

Red Guards.

     "China has a large population, a weak economic foundation,

relatively few resources and a large poverty population, which

remains our basic situation," Ma Jiantang, head of China's

statistics bureau, said in January. "Therefore, while we take

note of our expanding size of economy and enhancing economic

strength, we should also have a sober understanding that China

remains a developing nation."

     China's future influence on the global economy will

increase, said Shen at Mizuho. The country's "double-digit"

expansion will contribute a third of global growth this year,

the Organization for Economic Cooperation and Development said

in March.

     "Japan had a huge impact on the global commodities market

and foreign direct investment flows in the 1980s" as China is

doing now, Shen said. "The major difference is that China's

population is 10-times bigger than Japan's, its economy is still

growing at above 9 percent per year, and Chinese investors are

just beginning to invest abroad. You can imagine that China's

impact will be so much bigger."



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