China now has No. 2 economy in world
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|Mon, 08-16-2010 - 11:25am|
Monday, August 16, 2010 - Page updated at 06:55 AM
Complete article at: http://seattletimes.nwsource.com/html/nationworld/2012632465_chinecon16.html
China now has No. 2 economy in world
By DAVID BARBOZA
The New York Times
SHANGHAI, China After three decades of spectacular growth, China has passed Japan 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 milestone was reached when Japan announced its second-quarter gross domestic product (GDP) was valued at about $1.28 trillion, substantially less than forecast and slightly less than China's $1.33 trillion. The United States' full-year GDP was roughly $14 trillion in 2009.
GDP is the total value of all domestically produced goods and services.
Experts say unseating Japan, and in recent years passing Germany, France and Great Britain, underscores China's growing clout and bolsters forecasts that China will pass the United States as the world's biggest economy as early as 2030.
"This has enormous significance," said Nicholas Lardy, an economist at the Peterson Institute for International Economics in Washington, D.C. "It reconfirms what's been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China's region, they're now the biggest trading partner rather than the U.S. or Japan."
For Japan, whose economy has been stagnating for more than a decade, the figures reflect a decline in economic and political power. Japan has had the world's second-largest economy for much of the past four decades, according to the World Bank. And there was even talk during the 1980s about Japan's economy some day overtaking that of the U.S.
This country has roughly the same land mass as the United States, but it is burdened with one-fifth of the world's population and insufficient resources. China's per-capita income is more on a par with those of impoverished nations such as Algeria, El Salvador and Albania, close to $3,600, than that of the United States, where it is about $46,000.
Yet, there is little disputing that under the direction of the Communist Party, China has begun to reshape the way the global economy functions by virtue of its growing dominance of trade, its huge hoard of foreign-exchange reserves and U.S. government debt and its voracious appetite for oil, coal, iron ore and other natural resources.
China already is a major driver of global growth. The country's leaders have grown more confident on the international stage and have begun to assert greater influence in Asia, Africa and Latin America, with such things as special trade agreements and multibillion-dollar resource deals.
"They're exerting a lot of influence on the global economy and becoming dominant in Asia," said Eswar Prasad, a professor of trade policy at Cornell and former head of the International Monetary Fund's China division. "A lot of other economies in the region are essentially riding on China's coat tails, and this is remarkable for an economy with a low per-capita income."
The Chinese government also is beginning to shape global dialogues on a range of issues, analysts said, such as last year, when it asserted the dollar must be phased out as the world's primary reserve currency.
And while the United States and the European Union are struggling to grow in the wake of the worst economic crisis in decades, China has continued to climb up the economic league by investing heavily in infrastructure and backing a $586 billion stimulus plan.
Regardless, a fast-growing China suggests it will continue to compete fiercely with the United States and Europe for natural resources but also offer big opportunities for global companies and technology firms eager to tap its market.
China passed the United States last year to become the world's largest market for passenger vehicles. China also passed Germany last year to become the world's biggest exporter.
Global companies such as Caterpillar, General Electric, General Motors and Siemens, as well as scores of others, are making a more aggressive push into China, in some cases moving research and development centers here.
However, some analysts say that, while China is eager to assert itself as a financial and economic power, and to push its state companies to "go global", it is reluctant to play a greater role in the debate over climate change or how to slow the growth of greenhouse gases.
China passed the United States in 2006 to become the world's largest emitter of greenhouse gases, which scientists link to global warming. But it also has an ambitious program to cut the energy it uses for each unit of economic output by 20 percent by the end of 2010, compared with 2006.
China has imposed stringent automotive fuel-economy standards, built a new generation of more efficient coal-fired power plants and begun a national program to close antiquated factories or refit them with more efficient equipment.
Assessing what China's newfound clout means, though, is complicated. While the country is still relatively poor per capita, it has an authoritarian government that is capable of taking decisive action to stimulate the economy, build new projects and invest in specific industries.
That, said the Peterson Institute's Lardy at the Peterson Institute, gives the country unusual power.
"China is already the primary determiner of the price of virtually every major commodity," he said. "And the Chinese government can be much more decisive in allocating resources in a way that other governments of this level of per-capita income cannot."
New York Times reporter Hiroko Tabuchi contributed to this report.
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