[Newsbot]

Title: China Overtakes Japan as World's Second-Biggest Economy
Category: Business
Posted By: Canadaka
Date: 2010-08-16 13:04:11

[Dragom]

Does this mean I have to switch from ingesting Japanese pop culture to Chinese pop culture in order to avoid being absorbed by American pop culture?

[BionicBunny]

It just means more companies are contracting out to China. They're cheap, pay their workers little, have a lack of unions and have very little in the way of laws to govern the industries.

I work for a retail chain and you should see the garbage that is sent to us by China. And then to top it off, the company has the gall to charge the prices they do. I remember a shipment of tea trays we received at one time. Up to half of them were unfit to sell. The wood was either cracked, the trays were poorly painted and there were grinder mistakes they attempted to cover up by using excess paint.

[jenkins]

It seems inevitable that China's economy is on the rise. The combination of its population size and being the country of choice for manufacturing by other countries, there is no doubt they will surpass the US in 2020.

[andyt]

China will face some of the same problems Japan did. A property bubble - can only last so long. Aging population. Rising middle class demanding higher wages. Resource shortages.

[saturn_656]

jenkins jenkins:

It seems inevitable that China's economy is on the rise. The combination of its population size and being the country of choice for manufacturing by other countries, there is no doubt they will surpass the US in 2020.

Think 2040 or 2050...

[CommanderSock]

andyt andyt:

China will face some of the same problems Japan did. A property bubble - can only last so long. Aging population. Rising middle class demanding higher wages. Resource shortages.

This is indeed most likely the case.

Many people aren't really seeing what this means.

China overtaking Japan says more about Japan's stagnation that most would care to admit. The ageing population, shrinking workforce, high internal debt have added to the stagflation and and low economic growth. This was predicted by Economists for some time. Japan's standards of living are also getting worse annually. The number of jobs are disappearing faster than the workforce is shrinking.

Over 25% of the Japanese work force now works on contracts with no benefits, and this trend will only increase.

[bootlegga]

No big surprise, China's economy has been rising and Japan's moving sideways for more than a decade now.

[CommanderSock]

Moving sideways is not good.

Argentina's economy moved sideways for 100 years, (i.e stagnated, grew at about 1-3% annually). Argentina went from the 6th largest economy in the world, to an economic, and inevitably political basket-case.

Perhaps the Japan won't turn into Argentina (military Junta takeover, multiple defaults, IMF bailouts, unnecessary wars for popularity), but nevertheless it is a worrying situation (for them, and the rest of Asia primarily).

[Khar]

I found this to be a really interesting article, especially since other articles have mentioned how the two were compared -- a method which felt like a bit of a nod to the ongoing appreciation of the yuan, which is occurring at a fairly slow rate.

Although I remember hearing about an odd drop last week (which some attributed to policy intervention from the Chinese government) the slow Yuan appreciate may or may not change its status. For the longest time, the Yuan was pegged directly to the American dollar, and this did cause what they considered significant problems for the Current Account (affected by trade) of America, artificially pushing the advantage in that trade deal higher than it should have been to the Chinese, who had been keeping the Yuan low in an effort to keep exports high.

Of course, this cause outrage and way back in 2005 the situation came to a head when Congress demanded that the Chinese appreciate the Yuan over a period of time to better balance the current accounts. However, when Obama came into office the demands were carried further with efforts made to have liberalised currency floating, ie, allowing the Yuan to float compared to the dollar. The Chinese agreed to strictly regulated floating with allowances for them to take control when needed, one of the reasons why the momentary lapse in the Yuan’s overall appreciation experienced last week was a policy intervention. The Yuan has been rising slowly since, but has only gotten to about a third of a percent in appreciation so far. However, in general, I’m willing to be we’ll see the Yuan forced to rise for a long time overall if the Chinese do not intervene, as many economists have placed the price the Yuan is supposed to be at several dozen percent higher than it should be now.

This is on top of the fact that the Chinese, since 2008, have been working fervently to counteract anything they perceived could be a possible bubble, including placing restrictive requirements in their housing sector which I believed was mentioned in that article, amongst other things. While improved income has spelled good news for a lot of Chinese companies, especially those working in the low end consumer goods industries (textiles, etc), I would think that this can only go on and we will see China slow down a bit in growth, whether do to a supposed bust which some people are saying is going to happen but I’m betting at least due to the increasing government intervention to slow down the boom times to a more manageable level.

It’s worth keeping in mind that something similar happened to the Japanese, who had fixed the yen at 360 an American dollar. Demands from the Americans under similar concerns resulted in the quick appreciation of the Yen to 315, but did not make a massive dent in the negative Current Account. I think it’ll remain to be seen if this happens with China, or if the extremely slow and controlled appreciation will allow enough accommodation time in the world economy for the changes to not have a massively negative effect, based on the continuance of strongly inelastic need for Chinese goods – most countries buying these goods do not have the local manufacturing ability to capably meet their own needs, after all, especially Canada and the US.

I’m also wondering what this liberalisation will do overall when it comes to the Chinese capital account, since there seems to be increasing news of monetary trading and entrance into that from foreign investment. While I’m sure the Chinese government will fight to keep appreciation well within the boundaries they want, I’m also sure that they will face some competition from that sector (or perhaps I am simply overstating what I is expected there).