As it has become certain that China overtook Japan as the world’s second-largest economy in 2010, both countries need to consider new directions for managing their economy. China’s gross domestic product grew faster than expected — by 10.3 percent in 2010 — pulling down Japan from the No. 2 position that it had enjoyed since 1968. The Cabinet Office is scheduled to announced Japan’s preliminary GDP data for 2010 on Feb. 14.

It is predicted that China would overtake the United States as the world’s largest economy in about 20 years. But China’s per capita GDP is about one-tenth Japan’s ($3,734 versus $39,810 as of 2009). Despite its recent tight-money policy, China’s economy is apparently overheating. Rising property and food prices are fanning inflation fears.

China faces long-term problems such as economic divisions between the rich and poor and between urban and rural areas, environmental pollution, and a weak social welfare net. Its economic growth was driven by exports. Inevitably, how to achieve a balanced growth should be China’s top priority.

China also should be aware of its responsibility as an economic power in the international community. It should not repeat such behavior as restricting exports of rare earth elements. China is now the world’s No. 1 emitter of carbon dioxide; the U.S. is the No. 2 emitter. Together they account for more than 40 percent of global CO2 emissions. It is clear that China, along with the U.S., must accept international obligations to cut CO2 emissions.

Japan has succeeded in increasing its GDP over the decades. But people are worried about their future because of the stagnant economy, and the dwindling and graying population. It is high time that the government focus on improving the happiness of people as measured by factors such as sense of security, conveniences of daily life, reliable medical and nursing care services, quality of the environment and ease in taking holidays. It also must find ways to improve people’s well-being while saving natural resources.

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