China overtakes Japan as world's second-biggest economy
China has overtaken Japan as the world's second-biggest economy, figures out of Tokyo have shown.
Japan's economy was worth $5.474 trillion (£3.414 trillion) at the end of 2010. China's economy was closer to $5.8 trillion in the same period.
Japan has been hit by a drop in exports and consumer demand, while China has enjoyed a manufacturing boom.
At its current rate of growth, analysts see China overtaking the US as the world's top economy in about a decade.
"It's realistic to say that within 10 years China will be roughly the same size as the US economy," said Tom Miller of GK Dragonomics, a Beijing-based economic consultancy.
Negative demand
According to the latest figures from Tokyo, Japan's economy contracted at an annualised rate of 1.1% in the final three months of 2010. Growth declined 0.3% from the previous quarter.
It was the first time in five quarters that the economy contracted and it was caused by a dip in domestic and export demand, analysts said.
"The main reasons for the contraction are the expiry of government stimulus measures and negative external demand," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"It is going to be difficult for the economy to emerge from a lull in the January-March period.
"We are unlikely to see the economy worsen, but the recovery will not be strong enough for people to actually feel it is happening."
'Lost decade'
Japan has been struggling to come to terms with what many analysts call the "lost decade" of the 1990s when a property market and asset crash turned the economy on its head.
Domestic demand tumbled and exports also dropped as consumers looked for cheaper products from other emerging markets, and China in particular.
As a result, the majority of China's growth has been funded by a long-running manufacturing boom and the subsequent expansion of its domestic industries and infrastructure.
"There was an emphasis on infrastructure," said Duncan Innes-Ker of the Economist Intelligence Unit (EIU) in Beijing.
"They were building way ahead of where people thought the demand would be. And because the infrastructure was there, companies went there."
Whole picture
Most economists agree that while China as a whole is growing, and the average person is getting wealthier, comparing only the size of its economy to Japan's does not paint an accurate enough picture.
"GDP per head in China is about $4,500, but in Japan it's about $40,000 per head," said Mr Miller of GK Dragonomics.
"Most people in China are still poor, more people live in the countryside than in cities. The average Japanese person is much much richer than the average Chinese person."
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