China Officially World's Second-Biggest Economy

KARIM JAAFAR/AFP/Getty Image

TOKYO - It was first reported last year that China had the world's second biggest economy, but data released from Japan Sunday finally confirmed that.

A late-year downturn was Japan's first quarterly contraction in more than a year, and is partly the reason for the change in international economic hierarchy.

Japan's real GDP expanded 3.9 percent in the calendar year in the first annual growth in three years, but it wasn't enough to hold off a surging China. Japan's nominal GDP last year came to $5.4742 trillion, less than China's total of $5.8786 trillion, the Japanese Cabinet Office said.

"It's realistic to say that within 10 years China will be roughly the same size as the US economy," Tom Miller of GK Dragonomics, a Beijing-based economic consultancy, told the BBC.

Gross domestic product in Japan shrunk at an annualized rate of 1.1 percent in the October-December quarter, a sharp reversal from a revised 3.3 percent expansion in the third quarter, the government said.

A slowdown in exports and weaker consumer demand at home led to the unsurprising downturn, which is expected to be temporary. The result was better than Kyodo news agency's average market forecast of an annualized 2.2 percent decline.

China's boom has largely been supported by funding for its long-running manufacturing boom, the BBC reports. That, in turn, has led to a rapid expansion of domestic industries and infrastructure.

While China's economy is massive and growing at staggering rates, it is not entirely right to compare it to Japan's economy because of China's massive rural, poor population. China's per-capita income is about $3,600, less than one-tenth that of the United States or Japan, reports the New York Times.

[RedWings_ninety_one]

China is quickly advancing, however, I feel that they will stall out at about the same point where we currently are. Remember, in roughly 2000, we had 3 of the 5 world's largest banks.

[tmittelstaed]

Economics 101:

Ultimately the size of a given economy is going to be a function of it's population. We have a situation today where all people, across the globe, see the lifestyle that is enjoyed by people in the "developed" countries on TV - and they want the same thing. There is really nothing wrong with that. A world in which some countries are extremely wealthy and some countries are extremely poor is a recipie for a global world war. And as we all know, the next world war, if it ever happens, will be nuclear.

Many of the poor countries today have a lot of young people and few old people. This is for 2 reasons, first is life expectency until recently has been short, second these countries have seen a lot of population growth recently. In China's case, well it wasn't too long ago when millions of people died in cultural purges and the like. And these countries are going to grow like gangbusters because they do not have a lot of non-productive older citizens who are sucking up the medical care. But ultimately the same thing will happen to them that has happened to us and to many of the European countries - they will end up with a large percentage of older citizens, being supported by the younger ones. And these older citizens will be concerned about pollution and all the environmental things that they are concerned about here in the US and those countries will get more of those laws - and start enforcing the ones they have on their books. And as a result their economies will slow down.

People decry outsourcing from the United States but they seem to be missing the fact that many of the countries that we WERE outsourcing to we aren't any longer - and we are now outsourcing to different countries. Such as India. It's actually getting too expensive to outsource to there anymore and the outsourcing has tapered off, and is growing more in other, poorer, countries. This process will repeat until there are no other countries to outsource too, because their economies have grown up.

And one other thing about outsourcing, there are countries - like Mexico - where we never will be able to outsource to because their cultures are so messed up. You cannot do business in Mexico without paying bribes to everyone and their dog, and hiring your own private mercenary army to shoot and kill the drug cartel's armies. And even when you do that, the average Mexican down there isn't interested in working hard. The hard working Mexicans don't live in Mexico - they cross the border into the US. And Mexico isn't the only country like that, many others are also. Otherwise we would have outsourced to them 50 years ago.