China becomes the world’s second biggest economy

China has overtaken Japan as the world’s second-biggest economy.

Japan’s economy was worth $5.474 trillion (£3.414 trillion) at the end of 2010, figures from Tokyo have shown. 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 replacing 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.

Overseas risk

Japan played down the significance of the shift in the economic league table, and the fact that it has been replaced as the second-largest economy for the first time in more than four decades.

“As an economy, we are not competing for rankings but working to improve citizens’ lives,” said Economics Minister Kaoru Yosano.

The minister added that China’s booming economy was welcome news for Japan as a neighbouring country.

China is now Japan’s main trading partner and is increasingly important to companies such as electronics firm Sony and carmakers like Honda and Toyota.

However Mr Yosano said that Japan needed to closely watch “risks from overseas economies and currency moves”.

The yen has been strengthening against other currencies, recently touching a 15-year high against the dollar, and the fear is that the currency’s gains may hurt foreign demand for Japanese products.

Source: BBC