China economy overtakes the land of the setting sun

CHINA overtook Japan last year to become the world’s second-biggest economy in nominal terms, according to Japanese GDP figures released yesterday.

Japan ceded its second spot after GDP contracted in the fourth quarter due to an export slump that was exacerbated by the strong yen; the end of subsidies for carmakers; and a new tax on cigarettes.

Gross domestic product slowed 1.1 per cent in real, annualised, seasonally adjusted terms in the three months to the end of December. That left Japan’s nominal GDP for 2010 at 479.223 trillion yen or $5.474 trillion, below China’s $5.879 trillion figure for the same year.

This marked the first time that nominal Chinese GDP has surpassed Japan’s on a full-year basis, although it has done so on a quarterly basis several times before. The US is still well in the lead with nominal 2010 GDP of $14.66 trillion.

Economists said the event was largely symbolic, as China has been ranked as the second largest economy in terms of purchasing power since April 2008.