China surpasses Japan, becomes No. 2 economy
By Aileen Wang and Alan Wheatley |
July 31, 2010, Saturday
|
Print Edition
Print Edition
China has overtaken Japan to become the world's second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty.
Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No. 1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others.
China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China's chief currency regulator, mentioned the milestone in passing in remarks published yesterday.
"China, in fact, is now already the world's second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange.
Although cruising past Japan in gross terms, China's per-capita income of about US$3,800 a year is a fraction of Japan's or America's.
"China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.
China's economy expanded 11.1 percent in the first half of 2010 from a year earlier, and is likely to log growth of more than 9 percent for the whole year, Yi said.
China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said.
If China could chalk up growth this decade of 7 to 8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces.
If China can keep up a clip of 5 to 6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history.
China overtook Britain and France in 2005 and then Germany in 2007.
The country is a leading member of the Group of 20 rich and emerging nations, which since the 2008 financial crisis has become the world's premier economic policy-setting forum.
Yi said the Chinese government had no timetable to make the yuan fully convertible.
"China is very big and its development is unbalanced, which makes this problem much more complicated. It's difficult to reach a consensus on it," he said.
No rush on yuan
In the same vein, China was in no rush to turn the yuan into a global currency.
"We must be modest and we still have to keep a low profile. If other people choose the yuan as a reserve currency, we won't stop that as it is the demand of the market. However, we will not push hard to promote it," he added.
China has been encouraging the use of the yuan beyond its borders, allowing more trade to be settled in yuan and taking a series of measures to establish Hong Kong as an offshore center where the currency can circulate freely.
Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No. 1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others.
China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China's chief currency regulator, mentioned the milestone in passing in remarks published yesterday.
"China, in fact, is now already the world's second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange.
Although cruising past Japan in gross terms, China's per-capita income of about US$3,800 a year is a fraction of Japan's or America's.
"China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.
China's economy expanded 11.1 percent in the first half of 2010 from a year earlier, and is likely to log growth of more than 9 percent for the whole year, Yi said.
China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said.
If China could chalk up growth this decade of 7 to 8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces.
If China can keep up a clip of 5 to 6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history.
China overtook Britain and France in 2005 and then Germany in 2007.
The country is a leading member of the Group of 20 rich and emerging nations, which since the 2008 financial crisis has become the world's premier economic policy-setting forum.
Yi said the Chinese government had no timetable to make the yuan fully convertible.
"China is very big and its development is unbalanced, which makes this problem much more complicated. It's difficult to reach a consensus on it," he said.
No rush on yuan
In the same vein, China was in no rush to turn the yuan into a global currency.
"We must be modest and we still have to keep a low profile. If other people choose the yuan as a reserve currency, we won't stop that as it is the demand of the market. However, we will not push hard to promote it," he added.
China has been encouraging the use of the yuan beyond its borders, allowing more trade to be settled in yuan and taking a series of measures to establish Hong Kong as an offshore center where the currency can circulate freely.
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