China Overtakes Japan as World`s No. 2 Economy

China overtook Japan as the world’s second-largest economy in the second quarter, with Japan losing the No. 2 spot for the first time since overtaking West Germany in 1968.

The Japanese Cabinet Office said Monday that nominal GDP reached 1.2883 trillion U.S. dollars in the second quarter, lower than China’s 1.3369 trillion dollars. China’s economy will almost certainly grow bigger than Japan’s toward the end of the year because of the huge difference in each country’s growth rates.

China is projected to grow 10 percent this year as opposed to two-percent level forecast for Japan. Japan barely outpaced China last year with an estimated GDP of 5 trillion dollars as opposed to 4.9 trillion dollars. In 1968, Japan overtook West Germany as the world’s second-largest economy.

Just five years ago, China’s GDP was only half of Japan’s but has grown an annual average of 10 percent, whereas the Japanese economy posted negative growth over the same period.

The Japanese economy grew an annual average of 2.1 percent from 2005 to 2007, but has stayed in negative territory for two years following the global financial crisis in 2008.

Major foreign media expect China’s emergence to bring big changes in the world economic and political order. The New York Times said Monday, “The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.”

“Experts say unseating Japan, and in recent years passing Germany, France, and Great Britain, underscores China’s growing clout and bolsters forecasts that China will pass the U.S. as the world’s biggest economy as early as 2030.”

The New York Times added that in the 1980s, there was even talk of Japan’s economy overtaking that of the U.S. someday, but given economic stagnation lasting more than a decade, Japan will face a decline in economic and political power.

changkim@donga.com bonhong@donga.com