JAPAN/CHINA: China set to overtake Japan as world's second largest economy as soon as 2010 according to one of Nomura's senior economists

Record ID: 463761

  • Title: JAPAN/CHINA: China set to overtake Japan as world's second largest economy as soon as 2010 according to one of Nomura's senior economists
  • Date: 4th June 2009
  • Summary: GUANGDONG PROVINCE, CHINA (FILE) (REUTERS) VARIOUS OF WORKERS WORKING AT GARMENT FACTORY CONTAINER BEING LIFTED CRANE WORKING/CONTAINER ON TRUCK CONTAINER BEING LIFTED
  • Embargoed: 19th June 2009 13:00
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  • Topics: Finance
  • Reuters ID: LVAEYVN0K9MFHNK3LOAR335ZHKUH
  • Story Text: China will become the world's second largest economic power in 2010, overtaking Japan, said one of the Nomura's senior economists on Wednesday (June 3).
    "The reason why we think that China is to overtake Japan is that the world market is now facing difficulties and Japan is facing negative GDP growth of 6.3 percent this year and the next year we are expecting only a 0.8 percent growth. But, on the other hand China is really having success in encouraging the economic growth and we are expecting an 8 percent growth in China this year and also an 8.5 per cent growth next year. So, this dynamic will really change the position of these two countries," said Tomo Kinoshita, executive director of Nomura International from Hong Kong.
    Beijing has more resources to deal with the ongoing financial crisis because its public debt to GDP ratio was only 20 percent at the end of last year which enables it to come up with a massive fiscal package, pushing growth, he added.
    China's economic growth was hit by a sharp fall in exports, but was offset somewhat by the government's 4 trillion yuan ($585 billion U.S. dollar) stimulus package that was launched at the end of last year.
    The State Information Center, a key Chinese government think tank, reported in May that Chinese annual economic growth will rise to seven percent in the second quarter, up from the first quarter's 6.1 percent.
    Some people in Beijing seemed unfazed by the prediction.
    "I don't think it matters that China's economy is overtaking another country. What is more important is whether it is on the right track. That is why I am not very excited that China's economy will overtake Japan," said 26-year-old Beijing citizen Zhao Hun.
    "I don't think China's economy will surpass Japan. Although China has been seeing stable economic development, but the CPI is decreasing. So overall many things seem to have a downward tendency. I just don't believe China will overtake Japan. Japan is a small country, but it has a large share of the world economy," said Ms. Wang, a Beijing local.
    But in Tokyo, people are convinced and say Japan should have done better when the country was deep into recession.
    "It makes sense. China's got more people and I think Chinese people put more energy towards their nation's growth compared to the Japanese," said Seiji Ishikawa, a 45-year-old company owner.
    "I haven't really thought of the fact till now, but Japan should do better, it's kind of sad," said 44-year-old businesswoman Takemi Takeno.
    "I think it's a good thing for China or any other country to lead the world in this global economic downturn. Although as a Japanese national myself, I feel shameful at the same time," said Kazuyoshi Yokokawa, a 60-year-old businessman.
    Japan's economy shrank a record 4.0 percent in the first quarter as domestic demand and investment buckled, threatening to crush an anticipated export-led rebound in the second half.
    Any recovery depends on whether Japanese exporters, who have begun replenishing depleted inventory, see demand picking up in Western markets, and whether Tokyo's $160 billion stimulus plan can pull consumption at home back from the brink.
    Naomi Fink, a strategist at Bank of Tokyo-Mitsubishi UFJ appeared more optimistic. She says Japan's innovation sector is still very competitive.
    "Japan registers the largest number of patents worldwide, it has been a great innovator, it has been very competitive in the manufacturing sector, it has been a leader in many fields to an extent that China might not actually have contributed yet. So I don't really view it as too much of a threat to Japan," said Naomi.
    Japan's heavy reliance on export industries for growth has seen its economy suffer more those of its peers, which took a much bigger initial hit from the global financial meltdown that began in the U.S. mortgage market.
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