China’s #2 Economy

by Ryan on August 16, 2010

in Economy,History,International Relations

The figures are in and as of the second quarter of 2010, China has surpassed Japan as the world’s second largest economy.  Not bad, but in late 1800s, China technically had the world’s second largest economy too — it’s all a matter of perspective.  Don’t worry, the Japanese don’t sweat being passed by their historic rival.  Twenty years of economic stagnation and population collapse can sap a country’s drive and energy.

Japan shrugs while China chugs.  Like those in the West, Japan seems content to be involved in what Newt Gingrich once called “elegant decay:” if we’re going to wane, at least we’ll do it in style.

But China’s dependency on exports and cheap products overseas, plus an artificially-pegged currency all have a shelf-life too.  If America double dips, which many sober analysts fear, and we see deflationary or inflationary pressures, China gets nailed hard on either end.  Like America over the last decade or so, China’s been living in an artificial boom period so connected with ours only trouble lurks in their future without significant adjustments on their part — stop buying our debt, diversify more broadly, and start innovating rather than just producing.

{ 1 comment… read it below or add one }

Sal August 17, 2010 at 5:51 am

That is why, even with the economic collapse, America is still the world’s leading economy. It is the land of innovation, where the vast majority of new ideas in technology, medicine (for now) and finance are born. China’s production economy has the potential to grow into an innovating economy, but it’s a long way off from that, and right now they need us as much as (if not more) than we need them.

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