China’s rapid economic growth should propel it past Japan as the world’s second largest economy by next year, placing it firmly on the heels of the U.S. as the largest economy in the world, according to The New York Times.
In the midst of the worst economic crisis since the Great Depression, the Asian economic juggernaut is still growing rapidly. The Chinese economy is expected to grow roughly eight percent this year, down from the 10 percent growth that the Chinese averaged annually for the last two decades. The growth is still remarkable when considering that comparatively sized economies such as America’s and Japan’s are both expected to shrink in 2009.
China’s robust growth coupled with Japan’s economic woes should allow the communist nation to surpass the Japanese economy a full five years earlier than expected.
China is starting to act like an economic superpower rather a developing country. It also serves as the world’s factory, too. China is already the largest steel producer in the world, it holds the largest trade surplus and foreign currency reserves. Soon China may surpass the U.S. in purchasing power and as the largest exporter of capital.
But to fully get there, China will have to completely transform its economy, according to Fortune Magazine. China must begin to saves less, consume more, export less, import more, raise household incomes and drive up private consumption.
In addition, China will have to begin looking outside the developing world for assets to acquire instead of simply gobbling up natural resources in the developing world, which it has already begun to do. In 2008 alone, China doubled foreign investment abroad, from $25 billion to $50 billion.
With $2.1 trillion in currency reserves, the Chinese government certainly has the money to spend. And spend it has. China has spent $115 billion on foreign acquisitions this decade alone.
According to Fortune, in the past few years, China has purchased everything from foreign banks, to computer companies to semiconductor companies to utilities.
China has also recently purchased the Hummer brand from General Motors and is currently trying to acquire the Volvo brand from Ford.
Whether or not that final deal goes through, China’s dramatic rise to the very top of the economy food chain is not likely to be slowed down anytime soon.
“We’re no longer talking about China making lots of shoes,” C. H. Kwan, a senior fellow at the Nomura Institute of Capital Market Research, based in Tokyo, told The New York Times. “China is about to leave everyone behind in a big way.”