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Japan: Eyebrows raised by China’s rise to number two

By Flickr id xioubin low. CC license.

Financial data and figures say Japan has now fallen to number three in world ranking.
This month the Japanese government admitted that China has stolen its thunder [en] becoming the second largest economy after the US, as official figures showed that Japan’s gross domestic product was US$1.28 trillion in the second quarter against China's US$1.33 trillion.

But this announcement hasn't surprised many Japanese people who had been expecting it to happen sooner or later.
The buzz that media created about Japan being beaten by its Asian neighbor has made many bloggers raise their eyebrows and say: so what?

Ampontan, for instance, warns that China becoming the second largest economy in the world is nothing but a bubble that will eventually burst.

Yesterday, the English-language print media was filled with stories declaring that China’s economy had at last grown to become the second-largest in the world, surpassing that of Japan. One newspaper said it had “seized” second place (as if economies can seize anything), while another reported that it had captured the “second-place crown”.
Perhaps they should be forgiven, for it’s obvious they know not what they do. Many people, more often on the left than not, view the dynamics of national economies as a zero-sum contest–as if they were spectators at a baseball, football, or hockey game. The economists remind us that the potential for win-win is always there, but few people listen.[…]
As Gordon Chang points out in Forbes [en], the Chinese property market has become the 500-lb bubble in the middle of the room. When it pops–and you know it will–investors will take a bath so large the media will be inundated with water sports stories 24/7.

Japan emerged as economic superpower in 1968, when it became the second largest economy in the world, surpassing West Germany.
The “economic miracle” as defined by some scholars [en] was caused by multiple factors including postwar reforms and a high level of industrialization fostered by ‘keiretsu’ [en], a partnership of Government and private industry.
Nowadays Japan, with a population which is only one tenth of greater China's population, has a public debt to GDP ratio of about 200% and a mere 0.1% economic growth rate.

Takaojisan thinks it’s natural that the Chinese GDP passes Japan's as the population is bigger. But he also shares with Ampontan the opinion that the story that China is going to be the largest economy in the near future may go up in smoke.

単純に考え、日本の10倍の人口がいるから日本の10倍の購買力があるなどはあり得ず、結局は一部の富裕層が買いあさっているに過ぎない。中国のGDPは、個人消費ではなく、行き場のない金が向かっている投資によるところが大きい。そして、その投資がはじければ、中国の巨大な経済は一夜にして水泡に帰するのだ。なにしろ、経済の実体となりうる個人消費がきわめて限られ、インフラが整備されず、国民生活を支える有形無形の社会サービスがまったく形成されていないからだ。
つまり中国の投資バブルがはじけた場合の崩壊はすさまじいと言える。まさに、実体のない経済が雲散霧消するのだ。[…] 
 しかし、いずれ日本を経済規模で抜いたとしても、べつにそれがどうと言うことではないのだ。

Simply put, just because China has ten times the population of Japan, it does not necessarily follow that its purchasing power is also ten times greater, because it’s only a part of the wealthy class there that can buy as much as they like.
The Chinese GDP doesn’t depend on personal consumption but on the investments based on money that couldn’t be spent on anything else.
If those investments fail, China’s huge economy would evaporate. The reason why is that personal consumption, which may become the mainstay of its economy, is limited. The infrastructure is not well maintained and social services that support the citizens physically and socially aren’t organized at all.
In other words, the collapse if China’s investment bubble burst would be awful. An economy lacking a consistent base would vanish into thin air. […]
However, even if [China’s] economy passed the Japanese economy in scale, then what?

In addition to the figures that prove China’s economy being greater than the Japanese, experts forecast [en] that this growing power will eventually pass also the US by 2030, becoming then the largest economy in the whole world.

Blogger aen_ukon99 wonders what are the factors considered by the experts when examining a country's economic performance.

それに中国に生産拠点を移した多くの外国企業の生産はカウントされていないのかな?
そして安い労働力の供給元だった中国がこの頃自殺者やストなどで目覚め始めて多くの企業はインドやアフリカに移りつつあるって中国にとっては結構痛い話じゃ無いのかな。

I wonder whether they take into account the output of the numerous foreign companies that moved their production centers to China?
Also, China which has been providing a cheap labor force so far is starting to become aware of problems such as suicide and strikes which have made many companies move to India or Africa. This will become a sensitive issue for China won’t it?

More positive thinkers, like Bos, have taken the news as a reason to look ahead and help their country to utilize those values and strengths that made of it a world power in just a few decades.

まあ、いつか来る順位変動なので仕方がない。
これ以上落ちないように努力と行動と思考と知能を生かしていきたいものだ・・・・・。

China’s change in position is something that had to happen, there’s nothing we can do about it. However, we should strive to do our best and use our attitude, spirit and knowledge in order that Japan does not fall any further…

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