China's vault over Japan in the second quarter to become the world's second-largest economy has long been expected, particularly in light of Japan's prolonged economic weakness and gloomy prognosis.
But the symbolism of the new global economic rankings should not be dismissed lightly. Once-isolated Communist China has long coveted the restoration of the country's ancient role as Asia's leading economic power. And no other emerging country has acquired so much broad global clout in such a short time.
Since 2007, when most of the developed world slid into the worst economic slump since the Great Depression, China's export-driven economy has served as a beacon of hope for global recovery and a powerful engine of expansion for its south Asian neighbours in the world's fastest-growing region.
If it can maintain anything close to its current growth trajectory, China could surpass the United States to take over top spot within 10 to 15 years, analysts say. China actually ascended to the No. 2 economic slot several years ago in terms of purchasing power parity (the amount of goods and services that can be purchased domestically, relative to other countries, after accounting for exchange rate differences).
But when it comes to gauging the true health of China's economy, other temperature readings, including per capita output and income, are more useful than nominal national GDP. And those data reveal that China still has a large mountain to climb before it can discard its label as an emerging economy.
"On a per capita basis, the economy is still pretty low," said Na Liu, founder of CNC Asset Management Ltd., a Toronto-based firm that focuses on China's equity markets and global raw materials sectors. But that just shows how much more room there is for growth in the years ahead, particularly as China focuses on developing its weak domestic consumption and fledgling service sector, he said.
Chinese per capita GDP stands at about $4,000 (U.S.), which outstrips previous government targets by about 25 per cent. But when stacked up against other countries, China still trails the likes of South Africa, Ecuador and Algeria and has only about a tenth of the output of Canada or Japan, which has been battling stagnant growth and deflation for the better part of two decades.
On the income side, China ranks no better than 92nd on the World Bank list in U.S. dollar terms, behind such economic lightweights as Paraguay and Albania.