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China's spectacular ascendance begins to reshape the world economy
The country has passed Japan to become the second-largest economy behind the US
David Barboza, NYT, Shanghai
The Observer, Sunday 22 August 2010
Article history
{A Chinese worker makes his way along a construction site in Suining, Sichuan province. Photograph: AFP/Getty Images}
After three decades of spectacular growth, China passed Japan in the second quarter to become the world's second-largest economy behind the US, according to government figures released on Monday.
The milestone, though anticipated, is the most striking evidence yet of China's ascendance and that the rest of the world will have to reckon with a new economic superpower.
The recognition came early on 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. 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 US as the world's biggest economy as early as 2030. America's gross domestic product was about $14 trillion in 2009.
"This has enormous significance," said Nicholas Lardy, an economist at the Peterson Institute for International Economics. "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 US or Japan."
But while Japan's economy is mature and its population ageing, China is in the throes of urbanisation and is far from developed, analysts say, meaning it has a much lower standard of living, as well as a lot more room to grow. Just five years ago, China's GDP was about half of Japan's.
China's per capita income is more on a par with those of impoverished nations like Algeria, El Salvador and Albania – close to $3,600 – than that of the US, where it is about $46,000.
Yet there is little disputing that under 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 US government debt and its voracious appetite for natural resources.
China is already 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 things like 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 coattails, and this is remarkable for an economy with a low per capita income."
Beijing is also beginning to shape global dialogues on a range of issues, analysts said. Last year it asserted that the dollar must be phased out as the world's primary reserve currency.
"This is just the beginning," said Wang Tao, an economist at UBS in Beijing. "China is still a developing country. So it has a lot of room to grow. And China has the biggest impact on commodity prices – in Russia, India, Australia and Latin America."
There are huge challenges ahead, though. Economists say China is too heavily dependent on exports and investment and needs to encourage greater domestic consumption — something it has struggled to do.
Global companies are making a more aggressive push into the country, in some cases moving research and development centres there.
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 US in 2006 to become the world's largest emitter of greenhouse gases, which scientists link to global warming. But China also has an ambitious programme to cut the energy it uses for each unit of economic output by 20% by the end of 2010, compared to 2006.
Assessing what China's new clout means is complicated. While the country is still poor per capita, it has an authoritarian government capable of taking decisive action – to stimulate the economy, build new projects and invest in specific industries.
That, Lardy at the Peterson Institute said, 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."
[guardian.co.uk > News > World news > China]
China's spectacular ascendance begins to reshape the world economy
The country has passed Japan to become the second-largest economy behind the US
David Barboza, NYT, Shanghai
The Observer, Sunday 22 August 2010
Article history
{A Chinese worker makes his way along a construction site in Suining, Sichuan province. Photograph: AFP/Getty Images}
After three decades of spectacular growth, China passed Japan in the second quarter to become the world's second-largest economy behind the US, according to government figures released on Monday.
The milestone, though anticipated, is the most striking evidence yet of China's ascendance and that the rest of the world will have to reckon with a new economic superpower.
The recognition came early on 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. 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 US as the world's biggest economy as early as 2030. America's gross domestic product was about $14 trillion in 2009.
"This has enormous significance," said Nicholas Lardy, an economist at the Peterson Institute for International Economics. "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 US or Japan."
But while Japan's economy is mature and its population ageing, China is in the throes of urbanisation and is far from developed, analysts say, meaning it has a much lower standard of living, as well as a lot more room to grow. Just five years ago, China's GDP was about half of Japan's.
China's per capita income is more on a par with those of impoverished nations like Algeria, El Salvador and Albania – close to $3,600 – than that of the US, where it is about $46,000.
Yet there is little disputing that under 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 US government debt and its voracious appetite for natural resources.
China is already 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 things like 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 coattails, and this is remarkable for an economy with a low per capita income."
Beijing is also beginning to shape global dialogues on a range of issues, analysts said. Last year it asserted that the dollar must be phased out as the world's primary reserve currency.
"This is just the beginning," said Wang Tao, an economist at UBS in Beijing. "China is still a developing country. So it has a lot of room to grow. And China has the biggest impact on commodity prices – in Russia, India, Australia and Latin America."
There are huge challenges ahead, though. Economists say China is too heavily dependent on exports and investment and needs to encourage greater domestic consumption — something it has struggled to do.
Global companies are making a more aggressive push into the country, in some cases moving research and development centres there.
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 US in 2006 to become the world's largest emitter of greenhouse gases, which scientists link to global warming. But China also has an ambitious programme to cut the energy it uses for each unit of economic output by 20% by the end of 2010, compared to 2006.
Assessing what China's new clout means is complicated. While the country is still poor per capita, it has an authoritarian government capable of taking decisive action – to stimulate the economy, build new projects and invest in specific industries.
That, Lardy at the Peterson Institute said, 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."