China Becomes World’s Second-Largest Economy

China has surpassed Japan as the number two largest economy in the world

China has surpassed Japan as the number two largest economy in the world, second only to the United States after three decades of tremendous growth, according to Chinese state officials who released the official data Monday.

Although widely expected, the official announcement formalizes the status of China as a real economic superpower.

It was determined on Monday when Japan said that its economy was worth about $1.28 trillion in the second quarter, just below China’s $1.33 trillion. Tokyo said that Japan’s economy grew at a less than expected 0.4 percent for the quarter. If the trend holds, then China will also surpass Japan for the full year economic figures.

The U.S. gross domestic product for 2009 was valued at about $14 trillion.

Japan has been the latest economy to be leapfrogged by China, following Germany, France, and Great Britain in past years, and if the Chinese economy can sustain its current growth is also expected to surpass the United States as the world’s largest economy by 2030.

“This has enormous significance,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. “It reconfirms what’s been happening for the better part of a decade: China has been eclipsing Japan economically.”

“For everyone in China’s region, they’re now the biggest trading partner rather than the U.S. or Japan,” he added.

As early as five years ago, China’s gross domestic product of $2.3 trillion was half of Japan’s.

According to the World Bank, Japan has been the second-largest economy in the world for four decades, but its economic growth was flat for the last decade, and along with it the decline of its economic and political clout.

Japan’s economy is considered mature and it has an aging population while China in comparison is rapidly urbanizing but has lots of room for further development and lower standard of living, analysts point out.

Posted by James Fried on Tuesday August 17 2010, 9:15 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0