China overtakes Japan as world's second-biggest economy

BBC News Online presents the story (excerpts follow):

China has overtaken Japan as the world's second-biggest economy.

Japan's economy was worth $5.474 trillion (£3.414 trillion) at the end of 2010, figures from Tokyo have shown. China's economy was closer to $5.8 trillion in the same period.

Japan has been hit by a drop in exports and consumer demand, while China has enjoyed a manufacturing boom.

At its current rate of growth, analysts see China replacing the US as the world's top economy in about a decade.

"It's realistic to say that within 10 years China will be roughly the same size as the US economy," said Tom Miller of GK Dragonomics, a Beijing-based economic consultancy. ....

All well and good, but notice the caveats to this story at the end of the article, putting matters in important perspective:

Most economists agree that while China as a whole is growing, and the average person is getting wealthier, comparing only the size of its economy to Japan's does not paint an accurate enough picture.

"GDP per head in China is about $4,500, but in Japan it's about $40,000 per head," said Mr Miller of GK Dragonomics.

"Most people in China are still poor, more people live in the countryside than in cities. The average Japanese person is much much richer than the average Chinese person."

Do read in full: China's status as a superpower was a direct focus in one of the 45 mark examination questions asked last month for Unit 3.

Just yesterday, the BBC sounded warnings about the fragility of the Chinese economy, however impressive the "second biggest economy" news may be:

China could rue hasty dash for growth

As China has grown to become Asia's largest economy, its biggest achievement, most would agree, has been to raise hundreds of millions of its citizens out of poverty. But you don't have to walk far away from the main streets of Wuhan to find people who worry they are being left behind.

Xiong Qun Hui owns a small store she has to open 18 hours a day just to make ends meet. "The change is too fast," she complains. "Sometimes I stay at home to look after the shop, and if it's a while before I leave the neighbourhood, I get totally lost in the city."

Like Prof Wen, she questions whether the development going on in Wuhan, and the rising prices for real estate that come with it, will really benefit the majority of people who live here - especially those priced out of the housing market.

"This question is hard for the government as well as for the people," she says. "Why is it that those who can afford properties own many of them, when there are others who don't even have a place to live in. How can I put it? This is a problem with the system in this country - and what is wrong with the system. Well, I can't go into that."

For the government, that kind of comment is a worry, because it shows how easily complaints about the economy can turn into criticisms of the country's political system.

Imagine how much worse it would get if the asset prices - housing or land - were to collapse, as some fear could happen, leaving millions of disgruntled investors as unhappy as the poor. That could threaten the country's stability - and in China, that's always what policymakers are most afraid of.

As ever, read the whole article.