China still behind Japan economically
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According to newly released data by the Japanese government, Japan's nominal gross domestic Product (GDP) was worth $1.286 trillion in the second quarter, compared with $1.335 trillion for China, indicating that China will certainly overtake Japan as the world's second-largest economy this year.
This news sparked worldwide attention, with overseas media, especially, clamoring for China to take a more central role on the world stage as its economy expands.
Well, how should we rationally treat the phenomenon?
Analysts who are against using GDP as the primary indicator of a country's overall strength prefer the concept of per capita GDP. According to the International Monetary Fund, China's GDP per capita in 2009 was only $3,566, significantly lower than that of Japan ($39,573). China only ranked 99th worldwide in terms of per capita GDP.
GDP per capita is one of the most important indicators in identifying whether a country is a developed or a developing one. As per this criterion, China cannot be regarded as a middle-income country, let alone be placed on a par with Japan, whose economy has been the world's second largest for over four decades.
However, China's population is six to seven times that of Japan, indicating that the Chinese market has far more potential than Japan. With its vast territory and fruitful resources, China also has more space for industrial transfer and higher capability for economic self-support.
China's advantage over Japan is also presented in growth rate, demographic age structure and policy leeway. China's growth rate is expected to average 7 percent in the next decade, compared with Japan's 2 percent. China can still enjoy the demographic dividend until 2015, while Japan faces more severe aging problems.
In addition, Japan's debt-to-GDP ratio is approaching 200 percent, leaving Tokyo very limited space to adopt expansionary monetary or fiscal policies. With the current debt-to-GDP ratio at about 20 percent, Beijing still has policy leeway.
Actually, from the perspective of economic development history, many countries could lift their per capita GDP to the level of $5,000. But only the Republic of Korea and Singapore have successfully raised the figure to $20,000 from $5,000 over the past 20 years. And if China wants to achieve the same great leap, it must try to avoid two kinds of trap.
