By Hao Li: Subscribe to Hao's RSS feed
July 30, 2010 9:29 PM EDT
It is almost a foregone conclusion that China is rising and will surpass mature economies like Japan in many metrics. The only question is when these milestones will occur.
For example, the International Energy Agency reported that China has already surpassed the U.S. in 2009 as the largest energy consumer in the world, although Chinese officials dispute this claim.
As for Gross Domestic Product, which measures the size of an economy, China will probably surpass the U.S. to become the largest economy in a few decades.
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China's passing of Japan and taking the number two spot is even more certain and bound to happen very quickly. Its economy continued to expand at a blistering pace in the past two decades while Japan's growth peaked in the late 1980s and remained stagnant since then. Looking forward, Japan faces daunting challenges to growth while China is expected to continue to expand, albeit at a more moderate pace.
According to statistics from the IMF and World Bank, China's economy narrowed missed the number 2 position in 2009, with Japan's GDP coming in at roughly $5.1 trillion and China's at roughly $4.9 trillion.
However, China has probably caught up to Japan already. On July 30, Yi Gang, chief of China's State Administration of Foreign Exchange (SAFE), stated that China is now the second largest economy in the world.
Indeed, successful policy and largely untapped growth potential allowed China to expand at an average rate of 10 percent per year for the past 30 years. Along the way, the size of its economy has surpassed industrialized countries like Canada, Italy, U.K., France, Germany, and now Japan.
Richard Kang, chief investment officer & director of research at Emerging Global Advisors in New York, explained that emerging markets countries (with growth-friendly policies) simply have more room to grow than mature economies.
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