The Global Economy in Turbulent Times

CHAPTER 136 China: Much Ado about Nothing¹

Headline: “Rising China Tops Japan as World’s No. 2.” Looks like a big deal. Officially, the news came out of Tokyo two weeks ago on February 14, 2011, when the Japanese government reported its economy shrank at a 1.1 percent annual rate in the fourth quarter of 2010, a period when China’s gross domestic product (GDP) surged 9.8 percent from a year earlier. With those figures, Japan’s full-year GDP amounted to US$5.47 trillion, about 7 percent smaller than the US$5.88 trillion China reported in January. Japan’s real GDP for the full year (2010) expanded by 3.9 percent (–6.3 percent in 2009); for China, it’s expected at 10.3 percent for 2010 as a whole, up from 9.2 percent in 2009. Thus, China became the world’s second-largest economy in 2010, ending Japan’s 42-year reign in that position. As I see it, it is something that is bound to happen, considering China’s ballooning GDP and much, much larger population—just a matter of arithmetic and time. While China’s economy has several times in the past surpassed Japan’s based on quarterly data, February 14’s reading marks the first time China has done so on a full-year basis, the standard used for global rankings. Indeed, China’s recent success overshadows the fact that Japan’s economy expanded for all of 2010. Growth in the first nine months meant that even with the poor showing in the fourth quarter of 2010, Japan’s real GDP for the entire 2010 expanded at 3.9 percent.

Japan, China, ...