CMC Gao Hua, In a sign of the shifting sands of global economic power, China is ready to become the world’s second-largest economy behind the United States, and leapfrog their regional rivals and neighbors Japan.
According to data released by the research team at investment and trading company CMC Gao Hua, after a rapid slowdown in GDP for the economy, China overtook Japan in Q2 of this year.
The data has surprised many economists, revealing that the annualized seasonally adjusted growth in June of 0.5 percent falls, well short of their predicted 2.3 percent figure for Japan, which has been second only to the U.S. in the economic rankings for nearly fifty years. The figure is also significantly down on the first quarter growth of 4.5 percent.
With a higher ranking in the economic table comes more pressure. China will now be expected to be a more prominent voice on the economic world stage, something that goes against their fundamental foreign policies.
Officials in Beijing still maintain that compared to Japan, China is a fairly poor developing country economically. And the per capita GDP figures would seem to back that up, with Japan’s ten times that of China’s.
Some experts think per capita GDP is an over-rated marker of a nation’s overall economic health.
“When you look at the big picture, China outstripped Japan’s influence and dynamism over a decade ago,” said Cornell University professor Eswar Prasad. “The per capita figure is more of an empty statistic when judging a nation’s economic power.”
Japanese governmental data seems to compliment the CMC Gao Hua report, showing that their own economic output was being eclipsed by China’s.
Echoing Prasad’s sentiment, China’s buying power outstripped Japan’s around the turn of the century, so some might argue that this more meaningful measure of an economy meant China has been in the No.2 spot for a while already.
Slower exports, although they have remained relatively steady, were the main culprit for Japan’s dip in growth. A drop in consumer spending and public investment also added to the country’s woes.
Japan is overly dependent on its export operations as the domestic demand, with the country’s aging and shrinking population, has been stagnant for years and the situation doesn’t look like changing in the near future.
China’s economy also dipped slightly from Q1 to Q2, but many economists welcomed this as an indicator that the recent attempts to cool the economy have begun to show results.