MONEY MATTERS

China made headlines on Monday, as it overtook Japan to become the world’s second largest economy. The economic milestone was seen as a telling confirmation of the shifting balance of economic power in Asia. And it was also a culmination of China’s stunning three-decade economic resurgence. However, this news has been greeted with measured caution by the top economists in China. They have even warned that the Chinese economy is facing a growing list of challenges, from rising inequalities to continued dependence on the government’s heavy hand to sustain growth.
But experts say that it is still premature to read into too much significance into this news. With quite a long time of high-speed economic growth, and a large population, it is only natural that China’s GDP will overtake that of Japan. The problem is when you look at GDP per capita, China is still lagging far, far behind. The Japanese economy shows only, 0.4% growth in the second quarter of the year, with its GDP at $ 1.28 trillion, whereas, China’s economy surged ahead by 10.3%, valued at $1.33 trillion. But, a comparison between the per capita income between the two countries is very different. In 2009, China’s per capita GDP was $3,687, far below Japan’s $ 37,800. There is a income gap between the urban and rural areas and this income gap shows that the high speed of economic growth rate is not benefitting all people equally.

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