Unmistakably ascendant, Chinese economy overtakes Japan

August 16, 2010 | Posted by Chris

China has overtaken Japan as the world's second largest economy, and is on track to surpass the US in 2020. Downtown Beijing at night, above.

With the release from Tokyo of Japan's second quarter 2010 GDP statistics, something long expected has already happened: the absolute size of China's economy has inched passed Japan, making it Asia's largest and the world's second largest behind the US.

The statistics are less than perfectly clear, analysts note, because of different seasonal fluctuations in the Chinese and Japanese economies. Furthermore, the per capita GDP of the Chinese economy remains about a tenth of Japan. Bloomberg writes:

"China has a large population, a weak economic foundation, relatively few resources and a large poverty population, which remains our basic situation," Ma Jiantang, head of China's statistics bureau, said in January. “Therefore, while we take note of our expanding size of economy and enhancing economic strength, we should also have a sober understanding that China remains a developing nation."

Despite the qualifications attached to this achievement for the Chinese economy, it nonetheless is a clear harbinger that China has arrived on the world stage. While obvious to corporate and political leaders around the world for years, this story's headlines are sure to grab the attention of those that have willingly looked the other way thus far.

For China, this accomplishment is resounding confirmation of the correctness and shrewdness of its economic leadership over the last 30 years. After all, it was just in the 1970s that China embarked on the economic reforms that have transformed today's economy into a size 90 times that of in the 70s.

However, as the quote from Ma Jiantang suggests above, this is less a coronation than a congratulatory pat on the back. The goal, clearly, is to continue to lift its countryside out of poverty and make its big cities more competitive. For the Middle Kingdom, its domestic situation remains precarious, and barely being number two will not suffice -- so there is only one direction, and that is forward.

The Chinese have their eyes on the prize, a fact made more clear than ever by their economy's remarkable ascendance.

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