Economic rise spells flexed muscle

by Ko Hirano

Kyodo News

BEIJING — China’s ascension as the world’s second-largest economy last year underlines its rise as a major global economic power and potentially a confident, more assertive political power.

China’s economy grew a faster than expected 10.3 percent in 2010 from a year earlier, government data showed Thursday, adding further proof that the emerging economic powerhouse has overtaken Japan as the world’s second-largest economy.

The value of China’s gross domestic product for last year totaled 39.80 trillion yuan on a nominal basis, or about $6 trillion, the National Bureau of Statistics said.

Japan’s nominal GDP in 2010 was likely about ¥480.7 trillion, or $5.5 trillion. The Cabinet Office is scheduled to announce the country’s preliminary GDP data for 2010 on Feb. 14.

China’s announcement Thursday of its GDP last year made it certain Beijing has topped Japan in terms of last year’s nominal GDP.

It marks the end of an era for Japan, which had held the No. 2 spot since 1968. India is expected to surpass Japan as the world’s third-largest economy in 2028, major accounting firm PricewaterhouseCoopers said in a Jan. 7 report.

Some experts expect China to overtake the United States as the world’s largest economy in 20 years, which would be the most symbolic move in the shift of global economic power to emerging economies from the developed world.

In contrast, Japan is mired in political instability and structural problems, including persistent deflation, swelling public debt and rapid aging of its population, making it difficult to post steady growth without exports.

According to a World Bank estimate, the Chinese economy will expand 8.7 percent this year and 8.4 percent in 2012, compared with 1.8 percent and 2.0 percent, respectively, for Japan.

“It will be difficult for Japan to address such structural problems alone,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo, calling for advancing economic integration with emerging Asian economies via increased movements of people, goods and capital.

“A higher level of integration should narrow the gap between a ‘low-growth’ Japan and a ‘high-growth’ emerging Asia, and a ‘deflating’ Japan and an ‘inflating’ emerging Asia,” Kiuchi said.

In this regard, he encouraged Japan’s participation, for example, in a U.S.-backed free trade initiative called the Trans-Pacific Partnership Agreement.

Despite China’s rise to the world’s No. 2 economy, its public still think the country lags behind Japan and other developed nations, analysts said, citing Beijing’s low per capita GDP and pressing issues, including the property bubble, the gap between rich and poor, and the income divide between urban and rural areas.

Similarly, the analysts urged China to increase energy efficiency, stimulate domestic demand, promote deregulation and develop the service industry as a way of ensuring sustainable growth of its economy.

“Foreigners only look at the total size, while Chinese people only look at per capita figures. Different views cause a significant perceptual difference,” Da Wei, deputy director of the Institute of American Studies at the China Institutes of Contemporary International Relations, was quoted as saying in the Wednesday issue of the Global Times newspaper.

As of 2009, China’s GDP per capita totaled $3,734, compared with Japan’s $39,810, according to Organization for Economic Cooperation and Development data.

“What Chinese people have to do is not to become dizzy with success,” the paper quoted Da as saying. But he added China’s rapid rise “will always be accompanied by the ‘China threat’ theory.”

Foreign observers believe growing confidence in the economy and other areas was part of the reasons for Beijing to flex its muscles against Japan following the run-in involving a Chinese trawler and Japan Coast Guard cutters near the Senkaku Islands last year.