Analysts: China will be second biggest economy in 2 years

BEIJING: China will overtake Japan to become the second largest economy in the next two years, giving Beijing greater clout on the world stage, analysts say.

Figures to be released this week in Beijing are expected to show the economy expanded 9.5 per cent in the third quarter, further narrowing the gap with Japan which may only post 1 per cent growth for the period, economists forecast.

China is expected to unseat its Asian rival from the position it has held for more than 40 years in 2010 or 2011, though analysts say the shift in the global economic hierarchy will be largely symbolic with little impact on trade.

"China is already close to Japan in overall size so becoming the world's number two doesn't really have any substantive implications," Todd Lee, an analyst at IHS Global Insight, said. "Rapid economic growth will give China more weight in the global arena ...."

Before the global crisis struck, China had posted double-digit annual growth from 2003 to 2007 and again in the first two quarters of 2008, pushing its gross domestic product to US$4.3 trillion (US$1 = RM3.37), according to World Bank data.

Last year, US GDP was at US$14.2 trillion and Japan's economy was worth US$4.9 trillion, the data showed.

Eric Fishwick, head of economic research at CLSA Asia-Pacific Markets in Hong Kong, said the timing of China's ascendancy to number two was a "matter of arithmetic."

"Clearly it's going to happen - a combination of rapid Chinese growth and pretty stagnant Japanese growth," Fishwick said.

"If you are looking for the footprint that each has on the rest of the world, then looking at the incremental growth is much more important. When you do that then China has been more significant than Japan for quite a long time."

"The only thing standing between China and Japan in terms of who is number two is the Japanese yen," said Dong Tao, a Hong-Kong based economist for Credit Suisse. "Without the yen factor, China is already the world number two."

Toyoo Gyohten, a special adviser to Japan's finance ministry, however said China trailed a long way behind its Asian neighbours in terms of per capita GDP, which he put at slightly less than US$4,000.

"A simple calculation would show that China will need some 30 years to reach the per capita GDP level of Singapore or Japan, which is around US$40,000," Gyohten said. - AFP