Quality time for development

By Zhang Monan
0 CommentsPrint E-mail China Daily, January 28, 2011
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China's double-digital economic growth over the past years has helped it replace Japan as the world's second largest economy.

In terms of gross domestic product (GDP) China exceeded Japan from the second quarter of 2010 and its full-year GDP was more than 39 trillion yuan ($5.93 trillion), as indicated by statistics from the National Bureau of Statistics. That means China now has the second largest global economic status that Japan held for four decades. China's percentage of the global economy also increased from 1.8 percent in 1978 to 8.5 percent in 2009.

However, despite its economic size, China's economic quality and overall development are still far behind its neighbor and many economic indexes show there still exists a wide gap between them.

China's per capita GDP is only one-tenth of Japan's. Statistics from the International Monetary Fund (IMF) show that China's per capita GDP is only $4,412, far below Japan's $42,431 and Japan does not include its overseas assets in its GDP value, a statistical method that makes its real national wealth underestimated.

Japan began to push for the transformation of its development strategy from trade-reliant to investment-reliant from the beginning of this century. In a white paper drafted in 2005, Tokyo put forward the strategy of increasing the return ratio of its overseas assets and improving its international investment structure and quality. It also vowed to double the country's payment surplus to the GDP ratio by the end of 2030. To this end, Japan has actively taken measures to remove various obstacles to its direct foreign investment.

In the last five years, the country has harvested an annual average of $50 billion in interest on overseas securities, and its enterprises have made enormous profits on overseas investment. All these have greatly increased Japan's gross national product (GNP).

Compared with its neighbor, China's overseas investment is still in its initial stage and its GNP, a more accurate reflection of a country's economic power, is less than Japan's.

Compared with Japan's GDP, of which individual consumption contributes nearly 60 percent, China's economic growth has been largely driven by domestic investment and exports, a growth model it can no longer sustain. From 1979 to 2009, investment alone contributed 38.42 percent to China's economic growth on average.

Also, despite the fast growth of China's national wealth, the gap between its rich and poor has been widening in recent years, with the Gini Coefficient, a measurement of a country's distribution inequality, expanding to 0.48, a level far higher than the international "alert line" of 0.4. The income gap between the country's top 10 percent and lowest 10 percent had already widened to 23-fold in 2007 from the 7.3-fold in 1988.

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