China Overtakes Japan as World's Second-Biggest Economy

By Bloomberg News

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. Japan’s annual GDP is $5.07 trillion, while China’s is more than $4.9 trillion.

China led the world out of last year’s global recession with aneconomy that’s more than 90-times bigger than when leaderDeng 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.

To read more, visit: http://www.bloomberg.com/news/2010-08-16/china-economy-passes-japan-s-in-second-quarter-capping-three-decade-rise.html

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