China's GDP overtakes Japan


Japan's second-quarter GDP was less than China's before seasonal adjustments, government data showed today, underscoring expectations that China will overtake Japan as the world's second-largest economy this year.

Japan's second-quarter unadjusted GDP totalled $1.2883 trillion on a nominal dollar basis, against China's second-quarter unadjusted GDP of $1.3369 trillion, an estimate by Japan's Cabinet Office showed.

But Keisuke Tsumura, a parliamentary secretary at the Cabinet Office, told reporters that it would be misleading simply to compare quarterly growth figures for Asia's economic powerhouses, with a release from the Cabinet Office indicating that China does not release seasonally adjusted figures.

"It would be correct and fair to compare the figures for the whole year," Mr Tsumura said. "It will be very misleading to simply compare quarterly figures."

In the first six months of 2010, Japan's GDP before seasonal adjustments totalled $2.5871 trillion, surpassing China's $2.5325 trillion.

"People have been expecting the Chinese economy to grow at a rapid pace and become physically larger than Japan for many years, so it is not a surprise," said Robert Feldman, chief economist at Morgan Stanley MUFG Securities in Tokyo.

"The issue is whether this will be a trigger for policy changes in Japan," he said, although he added that in the short-term, domestic political considerations were paramount as prime minister Naoto Kan struggles with a hung parliament and a potential leadership challenge from his own party.

China's top currency regulator had said on July 30th that his country had already overtaken Japan as the world's second-biggest economy.

China's nominal GDP was 34.0507 trillion yuan ($5.013 trillion) in 2009, compared with Japan's nominal GDP of 474.303 trillion yen ($5.503 trillion), data from the two governments showed.

China's per capita income of about $3,800 a year is still a fraction of Japan's or America's, but China's economic ascent is gradually translating into clout on the world stage, even as Japan's influence appears to fade.

China's vice commerce minister Zhong Shan has said China must keep the yuan basically stable as part of a policy kit to support the country's international trade.

The yuan should also be used to settle more trade, with the government working to build up the currency's international profile, Mr Zhong wrote in the latest issue of the ruling Communist Party's Chinese-language magazine, Seeking Truth (Qiushi).

Along with stabilising the yuan's exchange rate, China needs to maintain consistency in its tax rebate policies for exporters, Mr Zhong said. His comments were in line with the commerce ministry's long-standing opposition to any major fluctuations in the yuan's value.

Chinese exports rose 38.1 per cent in July from a year earlier, while imports were up 22.7 per cent, putting the country's trade surplus at an 18-month high.

The yuan has appreciated less than 0.4 per cent against the dollar since it was lifted from a nearly two-year peg on June 19th.