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Monday 19 October 2009
China to overtake Japan in two years
China will overtake Japan to become the second largest economy in the next two years, giving Beijing greater clout on the world stage and boosting the ruling Communists’ stature at home, analysts say.
As world’s second largest economy, Beijing will get more clout on world stage
AFP 19 October 2009
(BEIJING) China will overtake Japan to become the second largest economy in the next two years, giving Beijing greater clout on the world stage and boosting the ruling Communists’ stature at home, analysts say.
Figures to be released this week in Beijing are expected to show that the economy expanded 9.5 per cent in the third quarter, further narrowing the gap with Japan which may only post one per cent growth for the period, economists forecast.
China is expected to unseat its Asian rival from the position that it has held for more than 40 years in 2010 or 2011, though analysts say that the shift in the global economic hierarchy will be largely symbolic with little impact on trade.
‘China is already close to Japan in overall size so becoming the world’s No 2 doesn’t really have any substantive implications,’ Todd Lee, an analyst at IHS Global Insight, told AFP.
‘Rapid economic growth will give China more weight in the global arena . . . and bragging rights and additional ammunition for the Chinese Communist Party to encourage national pride.’
Before the global crisis struck, China had posted double-digit annual growth from 2003 to 2007 and again in the first two quarters of 2008, pushing its gross domestic product (GDP) to US$4.3 trillion, according to World Bank data.
Last year, US GDP was at US$14.2 trillion and Japan’s economy was worth US$4.9 trillion, the data showed.
After slumping to 6.1 per cent growth in the first quarter of 2009 - the slowest pace in 20 years - China rebounded in the second quarter, with 7.9 per cent growth and it is expected to exceed 8 per cent for 2009 as a whole. The turnaround in China - underpinned by a four trillion yuan (S$816 billion) stimulus package and 7.4 trillion yuan in bank lending in the first half - has been in stark contrast to the situation in Japan.
Japan emerged from a year-long recession in the second quarter of 2009, but the economy is expected to contract by 6 per cent for the year before growing by an anaemic 0.9 per cent in 2010, according to the Organisation for Economic Cooperation and Development (OECD).
‘The only thing standing between China and Japan in terms of who is No 2 is the Japanese yen,’ said Dong Tao, a Hong-Kong based economist for Credit Suisse. ‘Without the yen factor, China is already the world No 2.’
The yen, seen as a safe-haven currency, remains stubbornly high against the US dollar due to the global crisis, while the Chinese yuan has been pegged to the greenback since July 2008. Toyoo Gyohten, a special advisor to Japan’s finance ministry, however said that China trailed a long way behind its Asian neighbours in terms of per capita GDP, which he put at slightly less than US$4,000.
‘A simple calculation would show that China will need some 30 years to reach the per capita GDP level of Singapore or Japan, which is around US$40,000,’ Mr. Gyohten said.
Jing Ulrich, managing director and chairman of China equities and commodities at JP Morgan in Hong Kong, said while China’s move to the No 2 spot would be ‘largely symbolic’, it would bolster its claim for a bigger say in how the world economy is run.
China, still excluded from the Group of Seven richest nations even though it has become a key driver of global economic growth, has been lobbying for a bigger role in groups such as the International Monetary Fund.
‘Status as the world’s second biggest economy may give greater weight to arguments that China should have increased representation and influence in international organisations,’ Ms. Ulrich said.
At home, where the legitimacy of the ruling Communist Party is tied to the strength of the economy, becoming No 2 in the world is far more significant.
‘Confidence in the government’s economic management has never been as high as at present,’ said Eric Fishwick, head of economic research at CLSA Asia-Pacific Markets in Hong Kong.
‘The policy reaction to the global crisis was outstandingly successful, at least to the requirements of generating robust growth. Overtaking Japan will be seen as vindication of that.’ - AFP
2 comments:
China to overtake Japan in two years
As world’s second largest economy, Beijing will get more clout on world stage
AFP
19 October 2009
(BEIJING) China will overtake Japan to become the second largest economy in the next two years, giving Beijing greater clout on the world stage and boosting the ruling Communists’ stature at home, analysts say.
Figures to be released this week in Beijing are expected to show that the economy expanded 9.5 per cent in the third quarter, further narrowing the gap with Japan which may only post one per cent growth for the period, economists forecast.
China is expected to unseat its Asian rival from the position that it has held for more than 40 years in 2010 or 2011, though analysts say that the shift in the global economic hierarchy will be largely symbolic with little impact on trade.
‘China is already close to Japan in overall size so becoming the world’s No 2 doesn’t really have any substantive implications,’ Todd Lee, an analyst at IHS Global Insight, told AFP.
‘Rapid economic growth will give China more weight in the global arena . . . and bragging rights and additional ammunition for the Chinese Communist Party to encourage national pride.’
Before the global crisis struck, China had posted double-digit annual growth from 2003 to 2007 and again in the first two quarters of 2008, pushing its gross domestic product (GDP) to US$4.3 trillion, according to World Bank data.
Last year, US GDP was at US$14.2 trillion and Japan’s economy was worth US$4.9 trillion, the data showed.
After slumping to 6.1 per cent growth in the first quarter of 2009 - the slowest pace in 20 years - China rebounded in the second quarter, with 7.9 per cent growth and it is expected to exceed 8 per cent for 2009 as a whole. The turnaround in China - underpinned by a four trillion yuan (S$816 billion) stimulus package and 7.4 trillion yuan in bank lending in the first half - has been in stark contrast to the situation in Japan.
Japan emerged from a year-long recession in the second quarter of 2009, but the economy is expected to contract by 6 per cent for the year before growing by an anaemic 0.9 per cent in 2010, according to the Organisation for Economic Cooperation and Development (OECD).
‘The only thing standing between China and Japan in terms of who is No 2 is the Japanese yen,’ said Dong Tao, a Hong-Kong based economist for Credit Suisse. ‘Without the yen factor, China is already the world No 2.’
The yen, seen as a safe-haven currency, remains stubbornly high against the US dollar due to the global crisis, while the Chinese yuan has been pegged to the greenback since July 2008. Toyoo Gyohten, a special advisor to Japan’s finance ministry, however said that China trailed a long way behind its Asian neighbours in terms of per capita GDP, which he put at slightly less than US$4,000.
‘A simple calculation would show that China will need some 30 years to reach the per capita GDP level of Singapore or Japan, which is around US$40,000,’ Mr. Gyohten said.
Jing Ulrich, managing director and chairman of China equities and commodities at JP Morgan in Hong Kong, said while China’s move to the No 2 spot would be ‘largely symbolic’, it would bolster its claim for a bigger say in how the world economy is run.
China, still excluded from the Group of Seven richest nations even though it has become a key driver of global economic growth, has been lobbying for a bigger role in groups such as the International Monetary Fund.
‘Status as the world’s second biggest economy may give greater weight to arguments that China should have increased representation and influence in international organisations,’ Ms. Ulrich said.
At home, where the legitimacy of the ruling Communist Party is tied to the strength of the economy, becoming No 2 in the world is far more significant.
‘Confidence in the government’s economic management has never been as high as at present,’ said Eric Fishwick, head of economic research at CLSA Asia-Pacific Markets in Hong Kong.
‘The policy reaction to the global crisis was outstandingly successful, at least to the requirements of generating robust growth. Overtaking Japan will be seen as vindication of that.’ - AFP
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