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China overtakes Japan in 2nd quarter as world's No. 2 economy

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Yes indeed japan is sliding straight downwards and there's nothing that the ruling elite can and will do about it.

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That's one way to see it. Another way to see it is that Japan is ~10x as productive as China. With around one tenth the population, Japan's output is just below that of China. That's not bad at all. I mean, did people expect that underdeveloped countries would remain so indefinitely?

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ha ha ha ha ha...

From the ashes of World War II, the country rose to become a global manufacturing and financial powerhouse. But its so-called “economic miracle” turned into a massive real estate bubble in the 1980s before imploding in 1991.

ever wonder how Japan was able to accomplish this considering that it was just emerging from absolute economic devestation?? perhaps b/c the Japanese military had looted massive amounts of items all across Asia during Japan's reign of terror. the looted gold, silver and jewels helped finance Japan Inc's economic rise in the years following the Occupation.

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...a few years more and India will occupy 3rd place....then? Japan will get used to it without getting upset over who is world's 4th or 5th...economy.

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OMG, a country that has more than 10x our population and landmass have just overtaken us economically. I think I might go depressed.

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So how large is the US and is Germany still in 4th? Are they catching up? Would be nice to see more info for comparison.

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NeoJamal - OMG, a country that has more than 10x our population and landmass have just overtaken us economically. I think I might go depressed.

You should be depressed considering Japan's economic status was built on scab labor, just the same as China's new status. It's very easy to build a huge economy when you only pay workers for 50% of the hours they work.

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Knowing what we all know, or think we know about Japan and it's policies, management and initiatives (or lack of).... This headline/story was unfortunately inevitable.

Only a dramatic transformation in the way people, businesses & the government thinks and acts will prevent Japan from sliding further down the slippery economic slope. But here in lies the problem "Change". A transformation in behavior is impossible without real change.

I have been told by quite a few close Japanese friends and family members that most people, schools, businesses and government agencies do not like change.

Ergo, I see nothing on the horizon that indicates a brighter future for Japan until the benefits of change are realized and embraced by society.

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looted gold, silver and jewels helped finance Japan Inc's economic rise in the years following the occupation

Funniest thing I've read yet.

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if china is going to be rich, the first country to benefit from these will be japan. so japan should concentrate to make money from the chinese as they are fond of japanese goods due to its quality

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So how large is the US and is Germany still in 4th? Are they catching up? Would be nice to see more info for comparison.

Here you go... http://bit.ly/bJm7xn

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Something needs to be done about this now.

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It's very easy to build a huge economy when you only pay workers for 50% of the hours they work.

LOL you imply as if Japanese workers are actually doing work during overtime. Unlike western office workers who put in their utmost effort during the first 8 hours of the working day, their Japanese counterparts are lazier.

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It's very easy to build a huge economy when you only pay workers for 50% of the hours they work.

LOL you imply as if Japanese workers are actually doing work during overtime. Unlike western office workers who put in their utmost effort during the first 8 hours of the working day, their Japanese counterparts are much lazier. The unpaid overtime is intended to redeem workers for their inaction during the day, even then many overtimers do very little work, often playing Go or Shogi with their boss and followed by an obligatory drinking session with the co-workers.

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Japan’s people still are among the world’s richest, with a per capita income of $37,800 last year, compared with China’s $3,600.

...China overtakes Japan

When you can hire 10 Chinese and make them work like slaves (and there are 1.4 billion of them) at the cost of 1 Japanese, no big suprise here.

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Expect to see the GOJ trying to placate their up and coming neighbors: Korea, China. With the surging yen, and Japan's shrinking economy and population, Japan needs its neighbors markets now more than ever!

Its going to be a great show!

Q: Now that Japan is #3, any ideas on when it will reach #4 or #5?

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bicultural: "Funniest thing I've ever heard"

If so, that's truly sad, but it is mildly amusing. What's more factual is that many of the companies who rose to be 'powerhouses' had based their foundation on the labour of POWs and the slave labour of those spirited away from other nations like Korea and China. Taro Aso's grandpappy's mines are a good example of a company that became rich and benefitted from slave labour.

Regardless, this article is more or less recycled from a recent article indicating much the same thing (although at that point had they technically passed Japan?). It was inevitable. One thing I believe I said then, and will reiterate now, is that the Japanese tend to work best when they are the 'underdogs', in order to become the top again. It's when they're at the top (of Asia, anyway), that they become useless and lethargic, losing all momentum. Sadly, I'm not convinced in this case that they WILL work to regain the #2 economy status; society is far too apathetic at present, and the rich are only seeking to get richer while the middle class shrinks and poverty increases. As said above, most people here won't consider 'change' as necessary until they're basically living on the street (and even then, the rich won't allow it to change radically enough to make a difference). This country is in for a bumpy road ahead.

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Everyone please note that according to this information, it is only THIS quarter that China exceeded Japan. You can't say China's economy is larger than Japan's until the end of the year, which they may if they exceed Japan for the other 2 quarters.

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This article is very deceptive in its description of Japan as "rich". As the guy from Barclay's states, per capita GDP is most important, and Japan is down in the mid- to low-twenties in countries of the world on that measure, depending on which source you use. And dropping due to the shrinking economy. Also, when ranked by buying power of that money, Japan is down around 33rd. So, if you want to take comfort in the fact that this was bound to happen since China has ten times the population of Japan, fine. But don't delude yourself into thinking things here are OK.

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Excellent news!! Coming weeks after I have moved to Chongqing!!

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Looted gold, silver and jewels? More infornmation please.......

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Japan’s people still are among the world’s richest, with a per capita income of $37,800 last year, compared with China’s $3,600.

...China overtakes Japan

Really? lots og the Japanese i know don't seem very rich. Live in shoebox, eat from conbini, take no holidays or rubbish cheap ones if they are allowed to. seems huge wealth disparity in Japan too.

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Japan's population might be among the world's richest, but definitely cannot be counted among the happiest. Living in a concrete box, being bullied at work/school, pressure from peers/parents/family, mounting debts, lack of real entertainment are not psychologically/mentally sound practices for living. Wakarimasen is right, most Japanese I know are not rich. In fact, the struggling poor I've seen in Japan are living a worse life than the poor I've seen around the world. The working poor in Japan are lonely, not to say the middle class and the rich are not. In fact, Japan is a lonely place. I guess that's why my wife refuses to live there. And also, the thing is, living in China, we make about 4 times of what we make in Japan, and we get to save about 25-30% of our income because stuff is not ridiculously expensive. We weren't struggling in Japan, but we weren't on our way to getting rich either. The average 'middle' class of China that we've seen is also a lot wealthier than their Japanese counterparts. There's the flashy new rich, and then again, there are the old families that had kept their wealth for hundreds of years. And the middle class here do spend a lot of money, and they do not really care about prices. We know, cause we're in a business that charge a lot of money for things they cannot make themselves, yet. So yeah, good for China for becoming No.2. It's a good number for now.

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imomofo could I have a job please?

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I saw this coming in 1998, when former PM, Dr. M averted the 1998 Asian Financial Crisis. It was an historic moment, and I may have been the only one in the world who knew it - my analysis is "bingo" here.

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It's very easy to build a huge economy when you only pay workers for 50% of the hours they work.

LOL you imply as if Japanese workers are actually doing work during overtime. Unlike western office workers who put in their utmost effort during the first 8 hours of the working day, their Japanese counterparts are lazier.

Yes, standing around the water cooler talking about celebrities and watching a cat play piano on Youtube is utmost effort. It depends on the individual worker, not which hemisphere they are in.

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I work in Japan, live in a 3 story house, work 50 hours a week but take a bunch of days off in the winter to go snowboarding, eat awesome home-cooked meals every day, don't experience any bullying or pressure from anyone, have a healthy social life with lots of Japanese friends ... hmm, am I the only one? I think not. Fact is, I'd much rather enjoy the middle class life in Tokyo than in China.

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@FukuokaRocks

...western office workers who put in their utmost effort during the first 8 hours of the working day....

Ha ha! Which western country are you from? Not anywhere I've ever worked.

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Unless China develops it's economy, the growth of China will not continue apace. Japan has a very developed industrial base, a highly organised infrastructure and the largest private savings on the planet. Japan is certainly in a stronger position to ride out the future.

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At this point it's pretty much a numbers game.

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It was the beginning of the end a long time ago. Back in my student days in the 90s, and again while working in local government, the warning signs of a dying country, culture, and people, were already evident, but scarcely taken notice of.

Lethargic office workers who arrived late every morning with hangovers. A postal and banking system reliant on too much manual labour. Government departments that struggled to justify their very existence, let alone their budgets. A myriad of meaningless rules & regulations that only serve to keep a communist-style government in power. An outdated education system that creates a nation of malleable workers who do not question authority power.

Japan will die and no-one will care.

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How do we stop China?

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it is only THIS quarter that China exceeded Japan. You can't say China's economy is larger than Japan's until the end of the year

whatever this guy is smoking, pass it over this way.

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But its so-called “economic miracle” turned into a massive real estate bubble in the 1980s before imploding in 1991.

And of course, nobody saw it coming. "How could we have known???" they all said.

Bloomberg headline - "Beijing billionaire who grew up with Mao sees no housing bubble." “I don’t see any bubbles,” says Zhang, dressed in a white V-neck zippered top, black slacks and red heels. “The next few months will be a fantastic time to buy.”

And maybe she is right. Or maybe Japan will be back in the second spot very soon.

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During the lunar new year, Chinese tourists spent the money like no more tomorrows. They bought plenty of digital cameras, flat screen TVs and mobile phones. Some even bought Japanese luxury cars. They spent more than western and other Asian tourists. One fruits seller from shopping district told me it was the most pleasant time in her life. Her business was blessed by high Chinese demand.

As per capital GDP, China may be lower than Japan. However their purchasing power is very strong at the moment. Their cost of living is relatively lower than Japanese counter parts. Imagine two guys who is making same income. Minus the living expenses and transportation cost. The equation is favourable to Chinese side. Poor cousin is richer now. It is time for making money! Not jealousy.

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China is number one now because almost everything is made in China. Japan has fallen to number two because the kids of today have no initiative to move forward to become number one like their parents. Today the kids of Japan are so lazy and lack the common sense to move forward.

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Who's number one ? It should be China !!!!!

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Who cares? Spread the wealth.

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Being the number 2, does it make the Chinese people happy or not? Not the Amerians or Japanese or Cubens or North Koreans. As long as the 1.4 billion people should be happy and need enough food to eat and medical care then this make sense, being Number 1 or Number 2 or numeber 0. Let every nation in the world follow Chinese communisum, then sure this world will be Utopia as Chinese teach their schools.

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alladin:

China is number one now because almost everything is made in China

CHINA IS NUMBER ONE NOW!!!?? Hey please reread the headline

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Now this is the time that China should retun the Billions of ODA they received from Japan, When they were begging for food and medicine for thier children. See the number of Hospitals and bridges made by Japanese ODA.............. Well Now we are rich and number two!!!!. Soon we will become number one. And we will make more weapons for self deffence. Now we need entire Sea in Asia because it is called China sea!!. Well everything for self defence. And All other Asian countries should obey us, other wise we will use our self defence. We forgot to claim that most of the Lands in India belong to us, so as Vietnam, Malayasia ........ We we need more money to spend to make more nukes for self defence..Self defence.. self defence...

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Only a matter of time before they are number one. If people want to cry about perhaps they should look at their governments and ask what they are doing to promote growth. I am surprised this didn't happen years ago.

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there are not enough physical resources left on the planet for China to be number one. There are Limits to Growth and this is also a book title. Also with Peak Oil the supply of oil is falling just as China needs it, so that's like falling down a hole.

the only way China increases is if the rest of the world decreases. Not much of an economy can result from that either

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The don't need to "increase" to be number one, the way the US is going, it will drop down to two soon enough.

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I've said it before and I'll say it again, people don't count the EU as a country because it's not technically, if you count the EU as an economy then Japan is 4th.

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Japan has a higher standard of living than USA. And unlike USA, Japan is not bankrupt. United States has a $127 trillion debt which is close to 10 times their $14 trillion GDP. This is money Americans owe Chinese and Japanese. In the future, both Japan and other countries will distance themselves from dead beat customers like USA who only seem to be able to contribute to the global economy by slowing it down. Anyone who cannot pay back what they borrow shows a lack of class or rather bad style.

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When you can hire 10 Chinese and make them work like slaves (and there are 1.4 billion of them) at the cost of 1 Japanese, no big suprise here.

Indeed, and add in the fact that they are destroying their environment to get to this wonderful GDP--God damn Product, as I call it. It has ABSOLUTELY no meaning for the average worker. And add in the fact that many factories now have placed nets underneath the lowest windows so that when their workers try to commit suicide, they fall into the nets and are placed quickly back to their work stations. AND add in the bit of fascism which makes things a bit easier for the government, and whoa!--you have an economic miracle. Wow! And to think that people actually think that this has any meaning!

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one party system is superior ...nobody can deny it is ...at least in china.

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And unlike USA, Japan is not bankrupt.

What are you talking about, proportionately Japan is the same or more in debt than the US. 98 airports in a country the size of California? Need I say more?

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What are you talking about, proportionately Japan is the same or more in debt than the US. 98 airports in a country the size of California? Need I say more?

You should say more because the people who the Japanese government owe money to are Japanese. Therefore the money is in Japan unlike bankrupt USA.

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Japan is not bankrupt. USA is because Japan does not owe US or China any money. US needs to borrow 500 billion each year just to be able to survive. They are dependent on foreign aid just to keep going. USA is bankrupt and Americans disillusioned.

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Both Japan and America are bankrupt. You're an idiot.

Good point. Now Japan can regret it was invaded by the USA, not by russia.

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The don't need to "increase" to be number one, the way the US is going, it will drop down to two soon enough.

The USA economy is bigger, its giant, so much so, it dwarfs the next top five, countries and EU's, on the list, COMBINED!! China didn't have to make a huge move to pass Japan.

You should say more because the people who the Japanese government owe money to are Japanese. Therefore the money is in Japan unlike bankrupt USA.

When the house of cards falls and America defaults on its loans, its your money, Japan, and when Japan defaults, its your money Japan, how is that a good thing? Both ways you lose, all your gains are wiped out.

Luckily, Japan is a country with an intelligent and dynamic population, the potential exists for greatness. Maybe, more free thought, and expression of ideas, should be promoted and celebrated. Maybe, Japan has pounded down its innovators all to often. Shouldn't serious thought should be given as to why things are going they way there going, down.

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It's about time. China has, what a billion and 300 million people?

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Japan overtook West Germany as the world's second largest economy in 1968.

So they were able to hold the No.2 spot for 42 years.

One wonders how long they will be able to hold No.3 spot.

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Japan was fortunate to have a positive working relationship with the Americans since the 1970's... but that has all gone the wayside- especially when Japan started lecturing the US on it's economic policies in the 80's- that was the beginning of the end. By the time the 90's hit- Japan's bubble had burst and it's been two lost decades and climbing.

China has figured this out- and by playing to the Americans sense of free trade with some give and take has benefitted much the way Japan and so many other nations around the world have. Face it- you can't have a growing economy unless you appease the Americans.

I don't see Japan ever regaining their foothold economically. Declining population, aging society, political system in dissaray, their debt to gdp ratio... it's all too much for the nations citizens to overcome- especially without the backing of US support. The Americans are not dumb- they sense and see the chinese market for what it is... vastly untapped ! Hell, housing alone could bring billions to the US economy as American architects and builders show the chinese how it's done- something the Japanese wouldn't with all the4ir protected markets. Nope- it's a done deal- no surprise- many of us here in the states saw this coming a year or so ago- when all the naysayers at JT were laughing at the prospects... well, now who's laughing !

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@Sarge: I think with this year's census, it should hit 1.55 billion or thereabouts. Unless we run into a zombie apocalypse. Sorry, cannot help that, just finished reading World War Z and the epidemic started in China. Sorry for being off topic, but you guys got to run out and get this book right now, if you haven't read it already.

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Japan is so far in-debt it isn't funny. Anyone sitting here saying "And unlike USA, Japan is not bankrupt" needs to either have their head examined or has no clue about the debt issue Japan has. It doesn't matter WHO they owe money to, it is how much they owe and it certainly is more per capita than the US. Japan will be the next Greece if they continue the way they are going. Everyone except the Japanese seem to be well aware of this - and Kan does as well which is why he is trying to help the economy with various plans - raising taxes being one of them. Now if only he would deal with the useless construction, payouts to dead people, the folks who don't pay their pension/health care...

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Even though china is the #2 economy, the question is how long can it stay there. Here is a good article on Forbes that talks about its warning signs http://www.forbes.com/forbes/2009/1228/economy-ponzi-debt-peking-china-bubble.html

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I don't really see the value in being economically #1 #2 or #3 if your country is still underdeveloped to the point that every time a natural disaster happens hundreds and thousands have to die. Or if you have such a gap between the haves and have-nots that further strengthening the authorian dictatorship system is the only way to control the unhappy masses. And as a state run economy is it even fair to compare it to the democratic nations? How many here would feel comfortable dumping their USD, BP, Euro, Yen holdings for RMB?

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@ neogreenjapan - "Japan has a higher standard of living than USA. And unlike USA, Japan is not bankrupt. United States has a $127 trillion debt which is close to 10 times their $14 trillion GDP."

You may want to recheck that number. It's $13.3 trillion USD at the moment and that's large enough! It's a terrible number for the average US citizen to bear, but it's still at around 100% of GDP while Japan is at 200% GDP. Just to be clear I am not proud of this number (ONLY 100% of GDP) at all -- it's an indication how poorly my country is being managed. But 200% is just mind blowing.

I for one hope China has a $100 trillion GDP so everyone can sell products to the consumers and make lots of $. Then we can all pay our debts down!

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Japan is so far in-debt it isn't funny. Anyone sitting here saying "And unlike USA, Japan is not bankrupt" needs to either have their head examined or has no clue about the debt issue Japan has. It doesn't matter WHO they owe money to, it is how much they owe and it certainly is more per capita than the US.

It makes a great difference. For a start Japan does not owe any money to any country and are not dependent on foreign aid. This makes Japan not bankrupt and USA bankrupt. This is not funny and anyone who is not American will understand this basic fact, Americans who do not are living in denial. Is patriotism such a hard pill to swallow? Hugs, simple people. US is still ayoung country, maybe in 800 years they will no longer be in debt their population have grown up slightly.

As I said, Japan is not dependent on aid unlike USA or Greece so this makes Japan not bankrupt USA bankrupt. USA owes China so much that once China dumps Dollars, it will make Brazil look like Switzerland. US is heading towards Haiti. it will forever be slaves of China and Saudi and the bin Laden family. U.S. will soon be off the world stage as any type of effective military or economic power - ANd others will be able to make this happen without firing a shot!" A 'classic' Sun Tzu paradigm of victory - the art of fighting, without fighting.

The crippling of the US is a highly desirable for the world economy.

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Japan isn't dependent on aid NOW, give it a year or so and we may be begging for handouts like Greece did. Go back and read other people's posts about the 200% comment. You might understand it if you read it slowly.

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In China er capita is $3,600, but that is misleading. The figure is much much higher if you take into account only the economically active Chinese who are mainly in the East side of China.

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Triple888 at 03:08 AM JST - 17th August In China er capita is $3,600, but that is misleading. The figure is much >much higher if you take into account only the economically active >Chinese who are mainly in the East side of China.

So the Chinese who don't live in the East side of China and aren't "economically active" (dead? comatose? beggars?) arent Chinese and shoud not be counted as part of the population?

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There is a big difference in quality of life between the big cities on the east coast and major parts of japan(some of which still don't have electricity).

Not sure how long China can remain No2. not easy maintaining the position, growth is already slowing and they have many internal issues to address. Also I foresee that China will in the not too distant future have to increase prices to keep up with the economic growth and growing demand for higher salaries, etc.

This of course will hurt economies that rely a lot on cheap chinese products like the USA.

USA has a big industry but majority of it is service orientated with production of goods being done externally.

So I foresee a few swaps in the top 4~5 ranks in the coming years.

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Just as post WWII Japan grew economically first with a very weak yen of Y360=USD1.00 and cheap labor, China has grown tremendously with the groundwork for economic refoirm laid out by Deng Xiao Ping in the 1980s, and the cheap exchange rate and cheap labor allowing the export market to fuel it's growth. But Japan saw that it could not rely on cheap labor forever and by the early 1970s starting throwing back it's export earnings into R&D, the fruits of which culminated in the high quality Japanese products of the 1980s. The question is has China prepared for the day when cheap labor or currency will not be enough to fuel it's exports?

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In China er capita is $3,600, but that is misleading. The figure is much much higher if you take into account only the economically active Chinese who are mainly in the East side of China.

What bit of "per capita" misleads you Triple888. Your argument isn't unique to China by anymeans.

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In regards to Japan... we got a sayin' out here on the ranch- "stick a fork in em- their done !!!

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actually this is good news. This will help Japanese focus on their own country and look to the opportunities that do exist in Japan. For China it will become a double edged sword as the world's ability to sustain China's appetite for energy drops eventually, and takes China's new economy with it.

Japan is ideally suited for geothermal and hydrothermal energy systems unlike any other nation. The sooner it gets on that track, the more jobs it will create and the brighter future as well as it weans off its own 90% plus oil and energy inputs. Also since such systems last for decades it would be paying off debts in line with the aging of Japanese society, a double win.

I hope news of this story creates enough self reflection to spur new ideas and not just more lethargy.

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neogreenjapan seems hell-bent on just shouting out jibberish till the less educated fold I guess.

-"For a start Japan does not owe any money to any country and are not dependent on foreign aid."

Japan's tax base is being decimated as we speak. An aging population combined with a dwindling birth rate will be catastrophic- no matter how many robots Japan makes to ease the worlload burden, them robots don't pay taxes ! Combine this with the current debt and you have a major meltdown much like Greece.

-"As I said, Japan is not dependent on aid unlike USA"

Ummm... just what foreign aid is the US dependent on ? Lets not confuse regular international market activity with "foreign aid" !

-"USA owes China so much that once China dumps Dollars, it will make Brazil look like Switzerland."

And then "who" exactly would China start selling their trinkets to ??? Canada ??? Jamaica ??? France ??? Solid catch-22 !

Face the facts Neogreenjapan- yer boys have not only failed to "go forth and multiply" but they have also failed to "internationalize". Many of us saw this coming years ago- Japan has simply not generated any sense of international good will with it's predatory business practices focusing on market share at the expense of the domestic market. I guarantee you China will not let that happen.

Zenny-

"Not sure how long China can remain No2. not easy maintaining the position, growth is already slowing and..."

Slowing ??? According to who ? Those dumbed down stats the Chinese government feeds the western media outlets every quarter ??? Get with the program- China continues to open major factories by major manufacturers on a weekly basis. China is awash in opportunity not seen since the start of the internet !

Ossanamerica-

"The question is has China prepared for the day when cheap labor or currency will not be enough to fuel it's exports?"

With their population base, you won't have to worry about that for decades to come. As far as being prepared ? Haven't you noticed all those hundreds of thousands of young chinese students returning from foreign universities these past 15 years ? They are more than prepared !

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Japan is NOT in debt. It's assets are greater than its debt. China produces nothing but junk.

Honestly, if you all hate Japan so much, then why do you come to this site?

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Jeff, care to post a link?

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So the Chinese who don't live in the East side of China and aren't "economically active" (dead? comatose? beggars?) arent Chinese and shoud not be counted as part of > the population?

Put it this way. Some lesser-than-intelligent Aliens from outer space arrived on Earth and measured the GDP per capita of everybody on the planet - they believed this was the best measure of the economic activity of the average human being. Would that not that overlook the economic strength of the Japanese or even the US? In the case of China, you're using one single indicator for over 1 billion individuals - you're forgiven if you cannot understand what a billion really is, you're only normal. China has a population greater than all European countries put together - shall I ask if that one GDP/cap of Europe is adequate for measuring the economic activity of say Germany? Anyone with a decent imagination if not a decent mathematical education will tell you the "average" of "mean" for a billion samples a very lousy measure for practical purposes!

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Go research it yourself. Japan could easily use the money from its one trillion dollar plus forex reserves to pay down is debt, or money from its massive trade surpluses. So no, Japan is NOT broke, unlike America. Japan HAS money. Most Japanese don't view the debt as a problem.

Also, I not only hate Japan, but the whole world. I hope the whole world becomes as prosperous as North Korea.

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Oh, and for those who complain about Japan's imaginary debt problem, what about your debt?

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Actually, I feel relieved that C keep growing because is our main trading partner. This is increased by the weakness of the dollar and euro that make the US and EU markets less profitable. If don't was for the grow of the chinese economy, we can be in an even worst position right now. I am pragmatic, I don't care who have the biggest economy, I just wish that everyone get back on solid growth, because if C, the US or the EU economies don't grow, that is a problem for all of us.

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I can assume there will be a lot of teeth sucking and "nan dake" going on in board rooms this week!

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Maybe this will reduce number of Chinese immigrants coming to Japan looking for work.

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First, let's start with some real gems!

one party system is superior ...nobody can deny it is ...at least in china. The one party system is "superior" only to those who make it up. Everyone else can eat dirt. Look around at every country with a one party system, and see how most of the population lives. Look at China, where by the average citizen barely gets by, and every year there is a disaster of enormous proportions because their infrastructure sucks. 2008 snow storm. Now, floods.

The Americans are not dumb- they sense and see the chinese market for what it is... vastly untapped ! Hell, housing alone could bring billions to the US economy as American architects and builders show the chinese how it's done- something the Japanese wouldn't with all the4ir protected markets.

What are you smoking, Branded. You think China has no architects, especially those who work for a tenth of what the American ones do? America has nothing that China does not now have, or workers who work for cheaper. Unless Americans work for 400 dollars a month, nothing is going to change.

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Not long until China becomes the #1 economy in the world. Some estimate China to overtake the U.S. within 20 years.

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I don't see this as a problem. Which country would you rather live in? At least in Japan and the U.S. or Europe you can drink the water in any city or town and not get sick. The air is breathable. China's power lies in it's millions of exploited poor people. Only THEIR buildings (especially schools) fell down in the 2008 earthquake. If that's what it takes to be #1, it's a meaningless achievement.

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"I don't see this as a problem. Which country would you rather live in? At least in Japan and the U.S. or Europe you can drink the water in any city or town and not get sick. The air is breathable."

As far as breathable air, yes, I'd stick with the U.S. or Europe. As far as abundant business opportunities in a vast frontier, I'd pick China.

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@darat-

"America has nothing that China does not now have"

Really ? How about a democracy ? Free speech ? Go ahead- tell me about China's equivelant to "The American dream". How about a free market system void of corruption ? Better yet- tell me about that high tech quality control system they have for their factories and manufacturing plants. I weon't even go into Americas monumental lead in education. The rat is wrong- China has a long way to go to "have what America has".

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@Branded: I don't think China wants what most of what America has, Gulf oil disaster, Iraq, Afghanistan, war with the Muslim world(China already has Xinjiang), broken economy, Sarah Palin, after effects of 9/11 etcetc. China wants America's wealth, and that's pretty much it, and China already has a chunk of that.

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@imomofo:

"China wants America's wealth, and that's pretty much it, and China already has a chunk of that."

A "chunk" ytou say ? Is that how you'd describe China's 1.3 trillion gdp to Americas "14 trillion" ??? And those were 2009 figures- when the global economy had all but froze up ! As for the rest of your post- petty attempt at America bashing. Like China doesn't have pollution problems ? Home to 12 of the 20 dirtiest cities on the planet. Nuclear armed North Korea in their backyard, a disenfranchised work force, an economy that could swing either way- depending on how much the yuan is allowed to freely flow, an under current of social angst brought on by communist ideologies... I could go on, but I won't. I"ll just tip my hat to the chinese for passing up Japan in record time- now the rest of Japan and it's inhabitants must chew on the fat of reality... China is #1 in Asia.

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China is #1 in Asia.

And I'm sure will be #1 in the world in the near future. I've read that investors predict it could be no more than a decade away, considering it's huge upside in growth and the U.S. extreme unemployment woes. However, it is worrisome that China's income per person ranks 124th in the world, far behind the U.S. (17th) and Japan (32nd).

http://finance.yahoo.com/news/China-surges-past-Japan-as-No-apf-3259091683.html?x=0

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@neogreenjapan and @Jeff198524

Who owns the debt is not very important because one day or another, the debt has to be repaid. As long as people are ready to buy debt bonds, it is OK. For years and until now, debt bonds have been emitted at very low rate, which makes it very convenient for the country to borrow at practically no cost. However, recently, the situation has started to change and might threaten the ability of Japan to borrow at cheap rates:

Japan population is getting older and is tapping into its savings (the nation's savings rate is falling at an appalling rate) The population started shrinking, which will ultimately mean a decrease ability of the government to fund social services and pensions and further pressure on private savings

The debt level is now so high than debt is emitted only to cover the interests of existing debt. Unless the government allows for drastic cuts in public spending and starts fighting against the shrinking tax-payer base (for example by increasing immigration 10-fold), it is highly likely Japan will have trouble selling bonds at such low rates (with increasing offer and decreasing demand).

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Seeing as how the purchasing power parity GDP goes along (Japan vs China: in 1890, 39,016 to 233,517 million dollars; in 1900, 50,045 to 260,600; in 1938, 169,367 to 399,627; in 1950, 156,564 to 355,530; in 1970, 985,736 to 893,745; in 1992, 2,415,190 vs 3,615,603), China has been a bigger economy than Japan almost all the time. What bothers us, however, is that while the world gets to avail ourselves of modern day comforts (food, clothes, electric goods, cars and others) on the cheap, it is being realized without much regard for the rules of the day such as intellectual property and autonomous function of foreign exchange market. Not to mention democracy of its people. Something rather irregular seems to be carving for itself on some whole new ball game. That's what worries us more than GDP talk. Meantime deregulation of economy doesn't seem to make us happier and actually it made us poorer. Perhaps we may have to dare opt for another way of life based on sustainability, decentralization and contentment. Consume less, live and eat locally and be happy and yet culturally active as if in Edo period. Declining may not be so bad.

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Obama is heading towards an economic disaster of historic proportions. Unemployment rate in USA is more than 10%. This in a country with no social security. Obama has already borrowed $1 trillion from China and he is not getting any more despite how much USA begs for money. Japan is making sure not to give out aid to USA any more. No foreigners are now buying US bonds fiat dollars. US will remain and continue to be treated as a pariah state. United States will soon be cut off from the international trading system, the fiat dollar will fall even more.

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@neogreenjapan

In fact, C and J combined have around 1.6 trillon dollars in US debt.

http://www.allgov.com/US_and_the_World/ViewNews/China_and_Japan_Hold_1_6_Trillion_Dollars_in_US_Debt_100817

And the US debt that C is selling J and Britain are buyin it or at least trying.

http://www.google.com/hostednews/ap/article/ALeqM5hvs4bqHvaxiS5Ii-VEjJFbdsz-MgD9HKPOVG0

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japan is just one of those nations who focusses its attention on China..By surprise,most Koreans don't know China very well indeed..But nonetheless,China's break-neck speed of its economic growth has far-reaching implications for Korea,Japan,U.S. & EU. As China becomes more self-confident, don't be surprised if they thumb their noses at foreign companies operating there and they will give more generous offers to taiwan firms in china.What this means is that China will eat away at foreign technologies which they offer and then China will kick them out of their country.

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China may have surpassed Japan as the 2nd biggest economy in the world, but China is still numero uno because of its huge POPULATION so, before rushing into thinking that somehow all of the millions and millions of poor Chinese will suddenly become rich, is only a DREAM! So the Chinese GDP is just a bit over that of Japan, now DIVIDE that GDP up buy the HUGE CHINESE POPULATION and what do you really get? Get my drift amigos? By the way, INDIA is set to surpass China as numero uno in world pop. soon!

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there are not enough physical resources left on the planet to allow China to have a GDP equal to that of the United States. You'd need 7 planets or whatever. Don't think we have those in stock

Actually, since energy will limit CHina's gains they will hit a wall. When they look up though, they'll see American et all crashing down.

We're all heading toward an equilibrium point, and for China divided out by its massive population it isn't much. But for America it will be a major drop.

China driving cars though will be its undoing, that can't be supported even for another 10 years.

Lots of inevitable Peak Oil upheaval to come. Enjoy.

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Hotbox08 at 10:19 AM JST - 17th August. Not long until China becomes the #1 economy in the world. Some estimate China to overtake the U.S. within 20 years.

Lets look at facts: Per capita income in China, $3,600 per year, U.S., $39,000 per year. U.S. has $14 trillion dollar economy, China, $4.2 trillion. U.S. currently has 3-1/2times bigger GDP. And your saying that China is to overtake U.S. in 20 years? Their economy has to double every ten years to do that. Is this possible? Maybe, but with the continue labor unrest and higher labor cost in China, I don't believe the growth in China is substainable at 10 percent a year for 20 years.

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"Actually, since energy will limit CHina's gains they will hit a wall. When they look up though, they'll see American et all crashing down."

Wishful thinking !

"We're all heading toward an equilibrium point, and for China divided out by its massive population it isn't much. But for America it will be a major drop."

Hardly ! The major effects of China's economic surge will be felt in Asia first ! We are currently witnessing the fallout of China surpassing Japan for #2- The angst and embarrassment rippling through Japan's society is most evident by the vast number of posts here declaring "Oh yeh- but what about quality of life ? and what about GDP ? and well... what about pollution ???" I dunno- what about all them things ! Red herrings in my book- the real story is how Japan, Korea, Vietnam, Russia, Australia etal will handle the mass immigration of chinese into their lands once chinese money starts to move overseas.

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"We are currently witnessing the fallout of China surpassing Japan for #2- The angst and embarrassment rippling through Japan's society is most evident by the vast number of posts here declaring "Oh yeh- but what about quality of life ? and what about GDP ? and well... what about pollution ???" I dunno- whatt about all them things !"

Can anyone respond to Branded, without sounding like a sore loser?

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Can anyone respond to Branded, without sounding like a sore loser?

You and Branded are confused. You see, a nation that has the most population should be at the top. The fact that Japan has 1/10th of the population and achieving and maintaining the #2 for that period of time is an embarassment to China. Ask your friend Branded what's going on in Arizona about your beloved people from China? What have I told you in the past mushroom? I said that when Chinese stops illegally immigrating my country in masses that I'll consider them as a developed nation. My answer to you was "not in my lifetime".

I'm also going to teach you what China has never experienced.

"Bubble"

"There were, a few months ago, 64.5 million urban flats that showed no electricity usage for six consecutive months. That’s one in four city apartments, enough housing for some 200 million people. The value of vacant apartments held by speculators is about 15% of gross domestic product."

That's 1.5 times the population of Japan my friend.

"And there is more bad news for the residential market. Property developers, who are already building 20 million flats, have company. Local governments are constructing another 20-30 million, and other government agencies and companies are also building housing for employees."

WHAT???????

"The overriding reality is that China’s incomes will not support housing prices at their current level, so there must eventually be an elimination of this gap. Because incomes cannot grow fast enough, prices must fall. Yes, the government will try to sustain the market, but Beijing’s measures are not stronger than market forces."

http://www.forbes.com/2010/08/12/china-property-electricity-asia-opinions-columnists-gordon-g-chang.html

Hmm. So one wonders why Wen is so eager to invite PM over to China.

ODA okawari is my guess.

"Developed" versus "Developing" For China, it's going to take a lot longer to hurdle that line.

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Nigelboy continues to bash away with one illogical comment after another:

"a nation that has the most population should be at the top"

Because why ??? Do tell us why India, China, the EU should be at the top of the worlds best economies list. I see no relevance whatsoever. Succesful economies are run on a variety of things including ability to adapt, creativity, workforce, open and free enterprise, laws that encourage development/investment/risk taking. These are just a few reasons why the US has been at the top of the pack for decades. Japan has simply failed to adapt to new markets- more precisely the global market.

"I'm also going to teach you what China has never experienced- Bubble"

So you are going to criticize China for, more or less, following sound market principles ??? Ohhh- the horror !

"The overriding reality is that China’s incomes will not support housing prices at their current level, so there must eventually be an elimination of this gap. Because incomes cannot grow fast enough"

Tell that to the union laborers that just shut down a few Japanese auto makers there in China over wage issues ! Wrong again Nigelboy- incomes will steadily rise and working conditions will improve- just look at what happened with Japan in the 70's- deja-vu all over again !

You seem to underestimate the Chinese more than you do the Americans- both sitting in the top two positions... seems to me it is you Nigelboy that is "confused".

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Because why ??? Do tell us why India, China, the EU should be at the top of the worlds best economies list. I see no relevance whatsoever. Succesful economies are run on a variety of things including ability to adapt, creativity, workforce, open and free enterprise, laws that encourage development/investment/risk taking. These are just a few reasons why the US has been at the top of the pack for decades. Japan has simply failed to adapt to new markets- more precisely the global market.

Actually, you nailed it. The reasons you stated are why U.S. and Japan are at the top for decades.

So you are going to criticize China for, more or less, following sound market principles ??? Ohhh- the horror !

Since when is supply overwhelming the demand is "following sound market principles"?

Tell that to the union laborers that just shut down a few Japanese auto makers there in China over wage issues !

Yes. Eventually, if the costs increase to a boiling point, the factories will shut down because there are no competetive advantage.

Wrong again Nigelboy- incomes will steadily rise and working conditions will improve- just look at what happened with Japan in the 70's- deja-vu all over again !

Then, the only competetive advantage that China had is lost.

You seem to underestimate the Chinese more than you do the Americans- both sitting in the top two positions... seems to me it is you Nigelboy that is "confused".

Another replacement quote.

"You seem to overestimate the Chinese more than you do to the Americans -both sitting in the misguided top two positions... seems to me it is you Braded that is "confused"

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"The reasons you stated are why U.S. and Japan are at the top for decades."

For the US- yes! Japan has simply tagged along on America's success since the 70's. They got too big for their britches during the Reagan years and its been down hill ever since !

"Since when is supply overwhelming the demand is "following sound market principles"?"

Since when is supply overwhelming demand ??? Again- look at the numbers- China's exports are growing !!!

"if the costs increase to a boiling point, the factories will shut down"

Not for decades to come ! Current salaries levels have a long way to go before they start eating into profits ! Cmon Nigelboy- you cann do better than this... but then again, you seem a bit out of your depth here if you really believe this "Then, the only competetive advantage that China had is lost" ! Again- not something you will see in your lifetime. The population base is so huge that manufacturing plants will slowly and steadily raise salaries in line with profit margins... Manufacturers know they have to appease their workers- but it must be in-line with profits.... basic econ 101 ! I see nothing unique about the chinese character to think they will just suddenly tear the country down and risk their individual livelihood over perceived slights in salary. Hell, many have lived on a few dollars a day- imagine how happy they'll be with 5x's that... and they'll still be making products at half the price the Japanese do !

You have obviously been underestimating your Asian neighbours for quite some time now- their accent to the second tier has obviously caught you off guard. Best get used to it... after a bit of shuffling back and forth I see China settling in for the long haul. All Japan can do is lament what might have been.

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If I may borrow from FrankUSA:

"As for 20 years before China passes the USA. Lot's of hurdles remain. But with only 3500 per capita GDP, the potential is there. When Japan tried to pass the US back in the 80's the per capita was already close to that of the US. So the comparison between China and Japan is not realistic.

Food for thought -- 10% per year gain in GDP = doubling every 7.2 years. China has been growing at 9.9% per year for 30 years. If this trend holds for the next 14.4 years, it would mean China would have $20 trillion ($4.9 trillion in 2009) in GDP by 2025. Given the US is growing at 3.5% per year and the US and company want China to appreciate its currency by 25% - 40%, the predicted 2030 by recent press is very conservative. Even at 20 trillion the per capita GDP is still only $12,000. Not an unrealistic number. Hopefully by then China would be democratic and the Chinese would demand a better environment. Things usually accompany this level of per capita GDP."

The numbers are very clear- China has a long way before they surpass the USA- in the meantime though chinese will be enjoying the fruits of their labor like never before- all this at Japan's expense of course. No wonder those of you in Japan are not happy... the signs are on the wall- the quality of life in Japan will continue it's downward spiral, it is inevitable as Japan has simply failed to adapt to the global market.

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I hope the US knows what it is doing - they are instrumental in restoring Asia to a situation not seen for centuries - the reemergence of a strong PRC, and the present pumping up of India economically. This is something the British Empire did not want, and to have any powerful influence of the region is now at an astronomical level of costs.

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One important thing to take into account is the calculation used for nominal GDP, which is explained in the article. The calculation uses the average USD exchange rates from the chosen period.

Comparing Q1 and Q2 2010, the yen weakened against the USD 1.54%, while the Yuan strengthened 0.06%.

So, using the exact same calculation for the first half of the year, instead of second quarter, Japan's nominal GDP is still higher than China's:

http://www.yomiuri.co.jp/dy/business/T100816003200.htm

In my opinion the fact is that comparing nominal GDP of two different economies using US dollars is not very meaningful. We can do all kinds of other calculations that would put Japan on top if we wanted to. That's what one some people mean when they say "symbolic".

The Yen extremely strong right now relative to the dollar... This is probably going to give a huge boost to the next quarter's nominal GDP figure... Which could well end up being higher than China again in Q3. The point is, the exchange rate influence is very strong.

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China has a long way before they surpass the USA

10 years is not such a long time, and that is the timeframe that many top investors are predicting.

In any case, it has been impressive until now how long the U.S. and Japan has stayed at the top, considering how much less of a population they have than China. I agree with you on that point.

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abromofo:

"The Yen extremely strong right now relative to the dollar... This is probably going to give a huge boost to the next quarter's nominal GDP figure... Which could well end up being higher than China again in Q3."

I agree- and like I said, you are probably going to see some jostling for the #2 position over the next few years... the point is though- China has come on like a freight train, strong yen or not. We are witnessing an event that many experts said wouldn't happen for another 10 years. China just blew by the Germans, French, Brits etc... kept their eye on the prize- Japan and voila ! Here we are the summer of 2010 and Japan is facing the cold hard facts... and they are contributing mightily to their own demise- one has to wonder if J politicians are now prepared to tell their own countrymen to just stop buying chinese goods. I remember how they used to lecture Americans on the topic. Again people- what goes around comes around... its now China's turn to bask in the glory of #2.

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Japan flaunted it's title as the 2nd largest economy for over 40 years.

What will Japan flaunt now? In the absence of Japan being a nuclear power, UNSC member, or world power, here's some advice: Japan should go all out in promoting it's excellent clean energy technology, bullet train technology, and ways to take care of the elderly, for which Japan has plenty of.

I'm sure the G-2 will still find plenty of use for Japan.

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For the US- yes! Japan has simply tagged along on America's success since the 70's. They got too big for their britches during the Reagan years and its been down hill ever since !

The growth in 70's were stagnant. That's when the stagnation began.

Since when is supply overwhelming demand ??? Again- look at the numbers- China's exports are growing !!!

Concentrate Branded. I was referring to the article where there are housing overages that encompasses 1.5 times the population of Japan. Just so you missed it, I'll post the contents once again.

"There were, a few months ago, 64.5 million urban flats that showed no electricity usage for six consecutive months. That’s one in four city apartments, enough housing for some 200 million people. The value of vacant apartments held by speculators is about 15% of gross domestic product."

"And there is more bad news for the residential market. Property developers, who are already building 20 million flats, have company. Local governments are constructing another 20-30 million, and other government agencies and companies are also building housing for employees."

This is called "supply overwhelming the demand". Understand?

Not for decades to come ! Current salaries levels have a long way to go before they start eating into profits

So those vacant lofts will remain vacant (15% of GDP) Thank you for clarifying.

While many Chinese supporters here are boasting about this so-called accomplishment, the below article basically states that the large GDP equals squat even those who are rich enough to travel to Japan.

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Nigelboy- Puleeze just a tad bit of research before posting from now on... puleeze !

"The growth in 70's were stagnant. That's when the stagnation began."

Really ? Not according to national statistics:

"average growth rates of 5% in the 1970s, and 4% in the 1980s" !

The rest is history ! BTW Nigelboy, did you happen to catch that Levis story here at JT?

"Levi Strauss now has hundreds of outlets in China and plans to open up to 1,000 by 2015." !

Now- what were you saying about "vacant lots" ?

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To Peeping_Tom's defense, he takes the position that China's economy has a bubble crisis on it's hands, similar to what Japan had in the 1980's. The difference being that China has, more or less both a quasi-centrally planned and free market economy, for which China could theoretically apply the brakes at any time to reign in excess loans and real estate speculation.

China is currently the only nation that's really pulling the world out of this great recession. If this real estate bubble bursts in China, it will pull the world down into the next Great Depression, because China will no longer be able to float the United States nor Europe with bonds purchases. From last count, China has purchased some $630 billion in Euro-bonds, and ~$900-$1 trillion in US Treasuries, hence keeping both regions on financial life support.

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The rest is history ! BTW Nigelboy, did you happen to catch that Levis story here at JT?

"Levi Strauss now has hundreds of outlets in China and plans to open up to 1,000 by 2015."

"Nike closes plant in China 2009" "10 million migrant factory workers won't go home for the holidays due to plant closures" "6% of migrant factories aren't paid"

http://news.livedoor.com/article/detail/4083996/

Now- what were you saying about "vacant lots" ?

uhhmm. Still vacant?

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Well Nigelboy- seems "livedoor" has quite the scoop, as only they are reporting such ridiculous numbers. Everyone else states 1,400 chinese laborers to be relocated to other factories. Now I'm not one to squabble over details but 10 million ??? It's a wonder China surpassed Japan at all considering all that gloom and doom reporting by livedoor.

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Well Nigelboy- seems "livedoor" has quite the scoop, as only they are reporting such ridiculous numbers. Everyone else states 1,400 chinese laborers to be relocated to other factories. Now I'm not one to squabble over details but 10 million ??? It's a wonder China surpassed Japan at all considering all that gloom and doom reporting by livedoor.

Livedoor just fed the news. The original source is in the link. Do some work.

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From last count, China has purchased some $630 billion in Euro-bonds, and ~$900-$1 trillion in US Treasuries, hence keeping both regions on financial life support.

Hmm. Since China has sold is US treasuries while Japan has increased, the gap has narrowed. Can we say that both China and Japan are keeping U.S. on financial life support? Them are fightin words to Branded!

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@Branded "A "chunk" ytou say ? Is that how you'd describe China's 1.3 trillion gdp to Americas "14 trillion" ??? And those were 2009 figures- when the global economy had all but froze up ! As for the rest of your post- petty attempt at America bashing. Like China doesn't have pollution problems ? Home to 12 of the 20 dirtiest cities on the planet. Nuclear armed North Korea in their backyard, a disenfranchised work force, an economy that could swing either way- depending on how much the yuan is allowed to freely flow, an under current of social angst brought on by communist ideologies... I could go on, but I won't. I"ll just tip my hat to the chinese for passing up Japan in record time- now the rest of Japan and it's inhabitants must chew on the fat of reality... China is #1 in Asia."

Won't disagree too much with you there. But I wasn't to 'bash 'merica', so quit twisting your panties into a bunch there.

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Nigelboy, very good points. Thanks for the Forbes link. I also think China is in a bubble and it won't be long before it bursts. Too much property speculating and price inflating, continuing labor unrest, growing class divide and income gap, etc. all point to this. China is #2 for now, but will drop from that spot sooner than most people think. Though, I can see how it gives face to some of the Chinese posters here, at least for now.

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Per capita GDP numbers are much more fun

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Pukey2

Think before you make a fool of yourself. I'm not pretending I know everything, but I'm just trying to figure out a reason for their actions instead of just assuming that the Chinese are out to inconvenience the Japanese.

That's exactly what it saids in the article that I linked.

Cultural differences? Sure it is. But what I'm talking about here is an about advancement in civilization. Hence, the point I was trying to make is that being #2 doesn't mean a whole lot when it lacks the latter.

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Thank you nigelboy for your informative posts backed up by links as always.

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"Hence, the point I was trying to make is that being #2 doesn't mean a whole lot..."

Yeh and prattling on about "going #2" is the best example you could come up with ? Sheesh !

Genjuro:

"I also think China is in a bubble and it won't be long before it bursts. Too much property speculating and price inflating, continuing labor unrest, growing class divide and income gap, etc."

I disagree ! Money is flowing freely in China these days and the current "global economic crisis" won't last for more than a year. There are too many major corporations opening up new factories with large scale plans for new shopping malls, theatres, building complexes, road repair etc. I don't see China in a bubble economy as much as I see fast growth... bringing with it increases in slaries, inflation, property values, etc. All easily controled by responsible money management. China is very different from Japan- there is no limit on growth potential ! China has plenty of development space and her markets are far from being saturated. Young chinese women are just now finding their shopping legs and should be able to carry the nation, much like Japans did, for decades !

I sense some "wishful" thinking out there by some JT posters- hoping that China's economy will fail, leading to the same stress, angst, disillusioned society like we see in Japan- Sorry ! That aint gonna happen any time soon... and if it did- do you think your lives would somehow improve there in Japan ??? Bwahahaha !

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Yeh and prattling on about "going #2" is the best example you could come up with ? Sheesh !

Why do I have to debate about the living conditions of developed country versus that of developing? Your argument is equivalent to Mexicans gloating and boasting about their country's GDP being highter than that of a Dutch. Or Indians to that of Australians. Or Sudanese to people of Luxemborg.

Can I come up with a quantitave measure? The only one I can think of is that Human Development Index which quantifies the standards of living.

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It's rather a matter of how you see it. According to the study the world's best countries compiled by the Newsweek recently, though I don't believe the result completely, no permanent members of the UNSC rank among the best ten, and out of the top 10 GDP economies, no countries except Japan ranks in the best ten. So in terms of GDP as well as education, health, quality of life and political environment, I'm sorry to say and hope it's not a wishful thinking, Japan still performs fairly well.

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The Human Development Index!! Good one!! The index where the US is lagging behind countries such as Canada and Japan. Indeed.........Bwahahaha!

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You cannot rule out the possibility of the US resorting to trade protectionism against China, at least for now. If this happens, it would be detrimental to China’s economic future. It is in China’s own economic interest to respond rationally to international criticisms.

It is important that China's policymakers recognize that rigid exchange rate is no longer compatible with China’s large and dynamic economy. A steady revaluation of the yuan is needed as a result of China’s own changing economic conditions. China needs to shift the economy away from exports and investment toward consumption. It would facilitate industries’ shift from producing low value added goods to high value added products and support sustainable economic growth.

The real exchange rate adjustment can occur either through nominal exchange rate or inflation. China’s average consumer price index has averaged only 1 per cent during the past decade. But it is now entering a new phase of development with steady increase in the costs of labor, land, capital and resources. These imply greater inflation pressure going forward. It might be helpful if the central bank could tolerate a somewhat higher inflation rate in the coming years.

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Wow, I thought this thread has died down. But it's livier than ever.

There is not much to glow here for the Chinese. $5.4 trillion GDP estimates for the year only amongst to 10% of Japan's on a per capita basis. However the China bashing isn't realistic either. When you have that much GDP it means a lot of people are depending on China to make a living, including many Japanese and Americans. If China tanks, it would hurt the world over. The hyped 2012 apocalyse may not be that far off if that happens.

@sfjp330 - US trade protectionism is possible, but it would not only hurt China, but the US as well. China is not as vulnerable to trade as most would believe. Read the Economist's Jan 2008 issue in the link below and you would know what I mean. As for currency adjustment, China has learned the lesson from Japan. After Japan was forced by America and the Europeans to appreciate its currency in the 80s/90s, Japan's economy hasn't been the same. The Chinese studies history pretty closely. I am not holding my breath for it to go free floating anytime in the next 2 years. Otherwise I would be all in Chinese yuan. As for inflation, it happens quite a bit, especially in food. With the wealth gap between the rich and poor so substantial, the government is really caught in a rock and hard place. Allowing substantial inflation would mean a lot of unhappy poor and pensioners. The CCP right now is all about stability. It's highly unlikely that they are going to let this get out of hand.

http://www-personal.umich.edu/~kathrynd/ChinaExports.Jan08.pdf

As for those who think China will fall soon, it is not impossible, but in my opinion the chance is smaller today than it was last year. By some estimates 30% of housing are speculative investments. The latest government policies seems to have contolled the prices somewhat as the developers are now moving into the second tier cities instead. People forget how big China is. The second tier cities' prices are only 30-50% of those in large cities. With the new high speed trains it takes may be 35 -40 minutes to go from Shanghai to a neighboring city. Better commute than many in America or Japan. Another thing is that renting is so much cheaper than buying. It costs around $200 USD a month for a $100k apartment (small one in a middle class Shanghai neighborhood). So many of those investments become rentals to take pressure off the housing shortages (make no mistake, there are a lot of shortage in the big cities as the Chinese likes to own properties). Therefore, although the housing bubble is not out of the question, it's not looking as dire as it was last year. As for labor unrest, foxconn recently moved a majority of its operations inland. 1.3 billion people, they can find some place where labor is malleable. This advantage will last for at least another 20 years before the one child policy starting to really hurt. I expect other manufacturers to follow and this would promote the development of the much poor inland areas. I always wondered where the next wave of growth for China would be. I believe this is it.

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"The Human Development Index!! Good one"

Yeh- good one indeed. An index dominasted by scandanavian countries with scrawny populations that no-one seems to want to live in ! In fact, out of the top 10 only France has a population of over 50 million ! Begs the question- if these nations are so advanced- why doesn't anyone want to live there ? As for Japan- no-one wants to even "reproduce" there ! The US sitting just outside the top 10 remains the nation of choice for immigrants and scholars world-wide. And I don't see China, Nippon, Australia, or Germany challenging that title anytime soon.

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If there is a need to rebalance the global economy by rebalancing the U.S.-China economic relationship, U.S. is probably going to have to begin this process on their own. And that means establishing some sort of tariff regime that will increase the cost of imports not just from China, but other countries that keep their currencies artificially low, restrict the flow of capital or maintain significant barriers to imports of goods and services. The proceeds of those tariffs should be used to encourage exports in some fashion.

This relationship, however, is one that must be actively managed by the two governments. It should be obvious by now that Chinese government is rather effective at managing their end of things. It should be equally obvious that U.S. cannot continue to rely on free markets to manage their end.

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BTW- propnents of the HDI should examine the three categories. The first is "life expectancy". Now in light of Japan's recent revelations concerning the missing number of centenerians- it's safe to say Japan's numbers givewn for the HDI study are "suspect" ! Next is "literacy rates". Japan boasts 100% literacy rates- odd thing though, if you hand a Japanese newspaper to any Japanese citizen on the street- they will fail to read it accurately 100% of the time ! Go ahead- give it a try ! Seems Japan has a different understanding of 100%. Finally "GDP"- Japan does well, but as we know the nation is slipping daily.

Now- knowing all these facts- everyone of them measurable mind you- how is it possible for Japan to be the highest ranked Asian nation coming in at number 10 ??? Ah yes- the Human Development Index... it's a good one !

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"If there is a need to rebalance the global economy by rebalancing the U.S.-China economic relationship, U.S. is probably going to have to begin this process on their own. And that means establishing some sort of tariff regime that will increase the cost of imports..."

Nope ! It's simply not the American way to increase or focus on punishments rather than rewards. I see more emphasis being put on American exports. Obama wants to double American exports over the next five years as export jobs on average pay 17% higher ! The first step will be to negotiate better terms with the Chinese.

Currently China protects is own industry through layers upon layers of bureaucracy and ambiguous laws and regulations. Also import duties for US goods in China are very high compared to import duties of Chinese goods to the US. Obama has laid out a new "export initiative"- rewarding people on all sides of the Pacific is much better than punishing them.

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Why in the world a small island nation as Japan needs to be number one, or two, or three makes absolutely no sense. Japan can now focus on whats more important, such as the quality of life of its people, and much, much more. Good luck, China!

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To Apple407:

"Why in the world a small island nation as Japan needs to be number one, or two, or three makes absolutely no sense."

Japan doesn't need a ranking, but they do have the ultimate mission to complete, if they so chose. By helping others, they will not only become bigger, stronger and prosper, they will fulfill the gifts they have been given. This will become more self evident over the next ten years, and it is very hi tech involving the development of the seas. Japan may have an exciting future, if they are up to the challenge.

It will be a LDP dream future - pouring tons of tons of concrete.

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"Watching China whizz by, Japan is now the world's third-largest economy. Can its firms cope?"-The Economist, August 19, 2010

"FIVE years ago China’s economy was half as big as Japan’s. This year it will probably be bigger (see chart 1). Quarterly figures announced this week showed that China had overtaken its ancient rival. It had previously done so only in the quarter before Christmas, when Chinese GDP is always seasonally high.

Since China’s population is ten times greater than Japan’s, this moment always seemed destined to arrive. But it is surprising how quickly it came. For Japan, which only two decades ago aspired to be number one, the slip to third place is a gloomy milestone. Yet worse may follow.

Many of the features of Japanese capitalism that contributed to its long malaise still persist: the country is lucky if its economy grows by 1% a year. Although Japan has made substantial reforms in corporate governance, financial openness and deregulation, they are far from enough. Unless dramatic changes take place, Japan may suffer a third lost decade.

Half the nation’s talent is squandered. Only 8% of managers are female, compared with around 40% in America and about 20% in China. There are more women on corporate boards in Kuwait than Tokyo. Women are paid 60-70% as much as their male counterparts. A manager at one of Japan’s biggest conglomerates says that 70% of qualified job applicants are women, but fewer than 10% of new hires are, since the work may entail visits to factories or mines, where they might perspire in an unladylike way. Kirin, a brewer, seeks to double the number of its female managers by 2015—to a mere 6% of the total.

To get the economy moving, Japan Inc took a page from its industrial-policy playbook of yore. In June the trade ministry released a sweeping new “growth strategy” that identifies a score of vibrant sectors meriting government assistance, from overseas construction to attracting medical tourists. The project calls for hundreds of reforms, big and small. But the bureaucrats most intimately involved were shunted to other jobs in July, so who knows whether any will be implemented. Once again, the practices of old Japan scuttle the new. Richard Katz, editor of the Oriental Economist (no relation to us), believes Japan has trouble tackling its problems because they are all inter-related. “It is hard to fix one without fixing the others,” he says.

The local news media have played down Japan’s slip to third place. Alarmists fear that South Korea—which has a much smaller population—may overtake Japan, too. Is Japan willing to fight to keep its bronze medal for as long as possible?

Supporters say that the country always seems to shuffle its feet but then snaps into action when faced with a crisis. It did so in the 19th century, adopting modern ways to avoid being colonised, and again after the second world war. Japan was the world’s second-largest economy for 40 years. But the traits that made it an economic powerhouse in the 20th century—easy capital, big companies, rote learning, management by mandarins and stable jobs for male breadwinners—are ill-suited to the 21st. Today, Japan’s biggest obstacle is itself. Without dramatic reform, it will slip swiftly to number four, number five and beyond."

http://www.economist.com/node/16847828?story_id=16847828

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mushroomcloud, you know what they say about The Economist, right? That's why I really wonder why you make yourself ridiculous (be it anonymously) here by desperately trying to prove your point by copying this article.

Did you actually read this article? If you did you would never have dared to post this! But......shoganai!!!

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roomtemperature, are you ok?

Feeling bad that an international publication (not Chinese propaganda) is broadcasting Japan's shrinking self?

A suggestion, read the title of the article above, as posted by JT. My apologies if The Economist made you feel small.

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This news was inevitable. Now watch as India edges in to displace Japan even further down the list. Then watch as, under Obama, America loses its place too. Changed times.

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"Japan looks for answers as China surges past"

Rick Wallace, Tokyo correspondent From: The Australian August 20, 2010

http://www.theaustralian.com.au/business/news/japan-looks-for-answers-as-china-surges-past/story-e6frg90o-1225907498533

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This news was inevitable. Now watch as India edges in to displace Japan even further down the list. Then watch as, under Obama, America loses its place too. Changed times.

Yep, you're probably right.... it'll be 2014 for the Indians as they take over the second place from the Japanese. I wouldn't be surprise if they edge out the Americans before the Chinese do.... It all seems very likely from where I'm standing :(

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And that means establishing some sort of tariff regime that will increase the cost of imports not just from China, but other countries that keep their currencies artificially low, restrict the flow of capital or maintain significant barriers to imports of goods and services. The proceeds of those tariffs should be used to encourage exports in some fashion.

So what exactly do you mean by all these, spjp330? Assuming countries (like China) will still export 'targeted' goods to the United States-- despite your proposed tariffs-- so 'proceeds' can be collected; how then will distressed industries benefit from your proposal?!

Are you proposing gov't stimulus to affected industries-- say textiles-- just to survive? Will nationalization (happens) be also on the card?

I think what you're saying sounds professional-and-all but maybe tax cuts sound more reasonable!

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Japan taking firm action!?!? Now there's something I'd like to see...

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2014 for the Indians? While I have no doubt that India will move up in the overall GDP rankings, as of 2009 they were in 11th place at $1.236 trillion, behind Canada. In 4 years, unless the world economy implodes (and India's economy doesn't), it seems a bit off for India to take away the 2nd largest economy title from China, or Japan's new title as 3rd largest economy of the world.

http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2009/02/indias_gdp_sink.html

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2014 for the Indians?

Possible... (and the financial market have already tipped the Japanese to lag behind the Indians by 2012-- check copy+paste below) and if anything happens between now and 2014, there's a reasonable chance they could edge the Chinese out for the second spot...

More importantly, the output of "emerging economies (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) would be “neck and neck” with the advanced G7 economies (US, Japan, Germany, UK, Italy, France, Canada) by 2019", which is good news for jobs and growth in developing countries...

From The Australian

India could overtake Japan to become the world's third largest economy behind the United States and China by 2012 when measured by purchasing power parity, according to a new forecast by PricewaterhouseCoopers.

http://www.theaustralian.com.au/business/in-depth/india-could-be-worlds-third-largest-economy-by-2012/story-e6frgaho-1225823914964

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jruaustralia at 01:31 AM JST - 23rd August. I think what you're saying sounds professional-and-all but maybe tax cuts sound more reasonable!

I disagree. Though many agree a higher corporate tax rate makes the U.S. less competitive over the long term. However, I doubt cutting the corporate rate would have any immediate impact. The reason is that cutting corporate taxes isn't focused specifically on expanding operations or creating jobs. You could create more opportunity for job creation but corporations could take that money and invest overseas. You can’t tell them what to do.

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You could create more opportunity for job creation but corporations could take that money and invest overseas. You can’t tell them what to do.

So to bolster national (US) competitiveness-- as oppose to plain industry viability-- the government will ultimately be the end to all means?! Perhaps more stimulus here and there, maybe nationalize (happens!) some industries deemed essential to local jobs, no?

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