Growth data fuels talk of 2nd biggest economy (01/22/2010)

Updated: 2010/1/22 10:01:00

China remains a developing country with a large number of poor people and low per capita GDP, the statistics chief said yesterday while releasing economic growth figures for last year which suggest the nation is poised to overtake Japan as the world´s second-largest economy.

The gross domestic product rose by 8.7 percent year-on-year to reach 33.54 trillion yuan ($4.91 trillion) in 2009, with fourth quarter growth accelerating to 10.7 percent from 9.1 percent in the third quarter, which analysts said indicates an entrenched recovery.

The growth has fanned intense discussion on whether the national economy had surpassed Japan´s by the end of 2009 and also fueled fears of rising inflation this year.

Japan´s GDP in 2008 was $4.84 trillion, but it is expected to have shrunk by at least 3 percent in 2009 due to the global financial crisis, meaning it would be less than China´s GDP, some economists said. Tokyo is scheduled to release 2009 growth figures next month.

But Bank of America-Merrill Lynch estimates that China did not surpass Japan last year in terms of GDP, because while Japan´s economy shrank, calculations are affected by currency fluctuations, according to Bloomberg.

The yen appreciated by about 10 percent against the dollar in 2009, which automatically enlarges Japan´s dollar-denominated GDP.

"The possibility of China having surpassed Japan in terms of dollar-denominated GDP in 2009 is slim," said Zuo Xiaolei, chief economist of Galaxy Securities in Beijing.

Given the current growth trend, analysts believe that it would happen this year.

Economists polled by Reuters expect growth this year to be around 9.5 percent, which would be enough for China to relegate Japan to No 3 in the world economic rankings.

Goldman Sachs expects China to eclipse the United States as the biggest economy by 2027.

Ma Jiantang, head of the National Bureau of Statistics (NBS), however, said China faces many challenges even if it becomes the second-largest economy.

"According to the UN standard - that is $1 a day - there are still 150 million poor people in China. That is China´s reality," Ma said. "So despite the increase in our GDP and economic strength, we still have to recognize that China is still a developing country."

China´s per capita GDP ranked 106th in 2008, according to the International Monetary Fund.

Ma also said the NBS will closely monitor price trends.

The consumer price index (CPI), the major gauge of inflation, rose 1.9 percent in December, compared with 0.6 percent in November, NBS statistics show. The CPI dropped by 0.7 percent for the whole of 2009.

Ma said price rises were "mild and under control", but many economists fear that the CPI could hit 5 percent or even higher in some months this year.

Due to the severe winter and the upcoming Chinese New Year, the CPI is expected to continue its sharp rise over the next two to three months, Nomura International said in a report.

Source: China Daily

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