It's confirmed—China is Asia's biggest economy.
Fresh data released by the Japanese government on Monday showed that China eclipsed Japan as the world's second largest economy, after the United States, in 2010.
Japan's nominal Gross Domestic Product (GDP), the most widely-used measure of a country's economic output, reached U.S. $5.4742 trillion in 2010, less than China's total of $5.8786 trillion, the Japanese Cabinet Office said in a report.
Japan, Asia's undisputed economic kingpin for more than four decades during its post-war "economic miracle," has been saddled with deflation, weak domestic demand and massive debt while China has been expandiing rapidly on the back of a manufacturing and export boom.
The Japanese government also said that the country's GDP contracted 1.1 percent in the October-December period of 2010, its first contraction in five quarters, though not as severe as the 2.4 percent slide forecast by most economists.
In contrast, China grew nearly 10 percent in the same period.
"Although this was not as weak as economists had anticipated, it was still the first quarterly contraction since Q3 (third quarter) of 2009. China has now officially overtaken the Japanese economy as the second largest in the world," said Kathy Lien, a senior analyst at U.S.-based Global Forex Trading.
"While the Japanese economy contracted by 1.1 percent, the Chinese economy grew by 9.8 percent. This stark difference clearly shows who is in control in the region," she said.
Japan still much richer
Japan, however, remains around 10 times richer than China on a per-capita basis, with GDP per head in Japan at around U.S. $40,000, economists say.
China first surpassed Japan last summer after half-year GDP numbers were released.
Monday's data confirmed its strength as an economic superpower and the rapid strides it is making in terms of economic expansion. China’s GDP just five years ago was only half of Japan’s.
China, now Japan's main trading partner, is also on track to overtake the U.S. as the world's number one economy.
Forecasts vary as to when China will eclipse the United States, but most economists believe it should occur within 15 years.
Most Americans, however, already believe China is the world's leading economy, according to a poll published Monday.
Fifty-two percent chose China as the top economic power when presented with a list of six options. Only 32 percent chose the United States, the Gallup poll said.
The poll reflected a major shift in perceptions: In 2009, Gallup found that Americans were nearly split on which country was the dominant economic power, with 39 percent choosing China and 37 percent choosing the United States.
China already on top?
In addition, at least one expert believes China is already the top economic power.
Measured in terms of purchasing power, China overtook the U.S. as the world’s largest economy sometime last year, said Arvind Subramaniam, an economist with the Washington-based Institute for International Economics.
In purchasing power parity (PPP) terms, adjusting for the different costs of living in the two countries, the size of China’s economy was U.S. $14.8 trillion in 2010, compared to the U.S. economy’s $14.6 trillion, he said in a recent report.
His estimate, however, has been disputed by several other economists. According to the IMF, China’s 2010 GDP was only U.S. $10.1 trillion in PPP terms.
PPP captures GDP using exchange rates that adjust for price differences of the same goods between nations.
Subramanian said his calculations were based on new estimates of GDP that will soon be published by Penn World Table, which provides purchasing power parity and national income accounts converted to international prices for 189 countries.
Adjustments were also made based on a different estimate for appreciation in China’s currency compared with that made by the International Monetary Fund, he said.
Reported by Parameswaran Ponnudurai and news agencies.