Powered by a surging growth in the manufacturing sector, China move a notch higher as the second largest economy in the world behind the United States and dislodged Japan which slipped to the third spot.
But the China’s rise was more because of Japan’s growth reduction rather than on sole account of the former’s impressive growth rate.
Japan’s gross domestic product (GDP) contracted 0.3 percent in the last quarter of 2010 as against the previous quarter. It was slightly less than the 0.5 percent forecast but still the first contraction recorded in the last five quarters.
According to Japanese figures released Monday, Japan’s economy did grow last year, but only by 3.9%. Japan’s economy was valued at $5.47 trillion dollars, which is slightly lower than China’s $5.88 trillion.
Analysts have earlier placed China’s growth rate to be around 10% and at the rate it’s growing is expected to hand the United States it’s defeat as the world’s largest economy in shorter than 20 years span.
The Asian powerhouse with the world’s largest population has been expanding domestic industries and infrastructure, following a surge in exports. Leading global companies and multinational corporations have also built production centers there, on account of low labor costs.
Meanwhile, Japan’s latest growth rate meant an annual contraction of 1.1 percent, which was the weakest among major rich nations. The United States posted an annual growth rate of 3.2 percent.
“The data confirms that the economy entered a lull on a downturn in private consumption, but recent monthly economic indicators such as output and exports show it is unlikely that the lull will be prolonged,” according to Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute.
He added that “the economy will continue to depend on external demand for growth, as domestic demand is likely to be capped by subdued income growth and the anticipated negative impact from the expiry of subsidies for energy-efficient electrical appliances.”