- Oracle hires former HP's Mark Hurd
- UPDATE 3-Oracle hires former HP's Hurd, Phillips leaves
- London gridlock as transport strike brings chaos
- UPDATE 2-Mears eyes struggling Connaught's contracts
- Firm can't fire man for 1.8 cent theft
- Nokia bets on new smartphones for recovery
- Connaught on brink of administration - BBC
- Obama kicks off campaign with infrastructure plan | Video
- German party mistakenly hands out porn pens to kids
- Europe Factors-Shares set to fall; focus on oils, miners
NYSE and AMEX quotes delayed by at least 20 minutes. NASDAQ delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.
Economy weighs on midterms
Tough economic times and aggressive campaigning by the Republicans weigh heavy on President Barack Obama and the Democratic Party. Follow Reuters for complete analysis, opinion and polls ahead of the November midterm elections. Full Coverage
China overtakes Japan as No.2 economy: FX chief
Related Video
Workers install steel bars on the foundation of a residential construction site in Shenyang, Liaoning province, June 29, 2010.
Credit: Reuters/Sheng Li
BEIJING |
BEIJING (Reuters) - China has overtaken Japan to become the world's second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty.
Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No.1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others.
China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China's chief currency regulator, mentioned the milestone in passing in remarks published on Friday.
"China, in fact, is now already the world's second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange.
Cruising past Japan might give China bragging rights, but its per-capita income of about $3,800 a year is a fraction of Japan's or America's.
"China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.
CAN IT BE SUSTAINED?
China's economy expanded 11.1 percent in the first half of 2010, from a year earlier, and is likely to log growth of more than 9 percent for the whole year, according to Yi.
China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said.
If China could chalk up growth this decade of 7-8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces.
In an assessment disputed by Beijing, the International Energy Agency said last week that China had surpassed the United States as the world's largest energy user.
If China can keep up a clip of 5-6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history.
The uninterrupted economic ascent, which saw China overtake Britain and France in 2005 and then Germany in 2007, is gradually translating into clout on the world stage.
China is a leading member of the Group of 20 rich and emerging nations, which since the 2008 financial crisis has become the world's premier economic policy-setting forum.
In one important respect, however, China is still a shrinking violet: anxious to shield itself from the rough-and-tumble of global markets, it does not permit its currency to be freely exchanged except for purposes of trade and foreign direct investment.
And Yi said Beijing had no timetable to make the yuan fully convertible.
"China is very big and its development is unbalanced, which makes this problem much more complicated. It's difficult to reach a consensus on it," he said.
In the same vein, China was in no rush to turn the yuan into a global currency.
"We must be modest and we still have to keep a low profile. If other people choose the yuan as a reserve currency, we won't stop that as it is the demand of the market. However, we will not push hard to promote it," he added.
NO BIG RISE IN YUAN
China has been encouraging the use of the yuan beyond its borders, allowing more trade to be settled in renminbi and taking a series of measures to establish Hong Kong as an offshore center where the currency can circulate freely.
But Yi said: "Don't think that since people are talking about it, the yuan is close to becoming a reserve currency. Actually, it's still far from that."
He said expectations of a stronger yuan, also known as the renminbi, had diminished. There was no basis for a sharp rise in the exchange rate, partly because the price level in China had risen steadily over the past decade.
"This suggests that the value of the renminbi has moved much closer to equilibrium compared with 10 years ago," he said.
Yi's comments are unlikely to go down well in Washington, where lawmakers have scheduled a hearing for September 16 to consider whether U.S. government action is needed to address China's exchange rate policy.
China scrapped the yuan's 23-month-old peg to the dollar on June 19 and resumed a managed float. The yuan has since risen only 0.8 percent against the dollar, and economists calculate that it has fallen in value against a basket of currencies.
China would stick to the principle of holding its $2.45 trillion of official reserves in a mix of currencies and assets.
The stockpile -- the world's largest - was so big that it was impossible to adjust its currency composition in a short space of time: "We won't be particularly bearish on the dollar at a given time or particularly bearish on the euro at another time."
(Additional reporting by Zhou Xin; Editing by Ken Wills)
Western Nations only have to withdraw their Company operations from China and the people of the west stop buying Chinese goods.
Will they? NO
Rise and fall, a natural cycle of life (which we struggle so much to deny).Apparently now it’s their turn to shine.
Who knows, maybe they’ll even succeed where others failed.
Like our great economy China will experience a major depression based on it’s growth…and with it’s hundred million member army I’m sure a war is most definite…especially when Taiwan is invaded…
I don’t now how long this kind of growth in China is going to last. I have spent almost a decade in China and can see the growth from both a western and a chinese perspective. China has many, many problems. As a normal person, the lives of even many Africans are still better than the lives of many Chinese, even though China has managed to become the second largest economy in the world.
There are many problems in China.
1. Education. They have many graduates, many of whom never studied one book in college. Chinese are often misunderstood in the education field. Many Chinese study abroad, and it gives western people the idea that chinese are very good at study and math. But, within China, that is not the case. I know many computer science majors who can’t reformat a computer. I know English majors who can’t speak a word of English. In fact, most of the college students I have met (including the time I spend studying my graduate degree in Nanjing University) spend all their time playing video games and basketball. The Universities do not create talented graduates ready for the job market in china.
2. Pollution. The chinese engine of growth has created cities that have air pollution reaching up to 150 particulate levels (by comparison, US and European cities usually only reach around 50). After the Olympics, the Beijing sky cleared up. But, just in the past few days, that pre-olympic pollution has come back to the Beijing skies. Today was especially bad. The water pollution, land pollution, and food pollution makes the matter worse.
3. Debt. Believe it or not, the Chinese also have a debt problem. Not only do they have local government debt problems, but they also have many development projects in place now that don’t make any sense. One of my friends lives in a nice part of Beijng, and more than half of the apartments in the building he lives in are empty. They continue to build apartments. That doesn’t make sense. It isn’t just his area either. It is all over beijing, and including the countryside. I visited an area in Jiangsu province which has an entire town built up out of scratch and nobody lives there.
4. Foreigners face discrimination daily. Of coures, if you are an Asian looking foreigner, you don’t feel this. But, if you are white, black, or a dark skinned asian, you are discriminated against everywhere. I have been asked if I am black during phone interviews. If i were black, they would not hire me. They also have attacked some white female friends of mine. One was attacked in nanjing by a guy who thought it would be good to grab a white girl. They also think that we non-chinese expats can’t understand chinese and everytime we get on the subway or the bus, they spew their racist, xenophobic rhetoric. Just today, I was listening to a guy in the cafe talking about how foriegners look down on Chinese, but then he starts talking about foreigners as if we were dogs. They can spew the racist remarks, but they can’t take them. This racism has led a lot of talented foreigners, who make up a large part of China’s GDP, to actually return home.
5. China also discriminates against foreign companies with indigenous innovation laws and restricting certain foreign companies for developmental projects. This has led some companies to set up shop in vietnam and other surrounding countries in order to export to the Chinese market.
6. The days of the cheap labor in China are numbered. As more and more workers demand higher pay, the companies will go elsewhere. China is going to loose its advantages from cheap labor to other countries like india and African countries.
The list goes on and on. Of course, from the media it looks like things are perfect in China. The chinese are lobbying hard in the west to try and show a utopia-like picture of things here. But, most of us who have actually been in this country and can compare with other countries know the truth.
China might be second, but they are still very far away from creating a “harmonious society.”
Before i step my foot into China, all the media make it perfect, you wont know when you live and work there, experience it yourself, Shanghai’s architecture is good, all these 20 years, made, of course compare to the modern buildings in New York. But this is the surface feel. When you reach Shanghai walk into Lujiazui saw the footbridge, across are a large number of country folk, different before your last day in New York City, The Financial Center of the world is still in New York. China’s surface is well developed, but the essence and the United States differ by at least a hundred years. Similarly, if you look at Queen’s Road Central Hong Kong people, Hong Kong. Shanghai, software is worse at least 50 years. To develop a Hardware is easy, but the quality of the people, then society is not easy to improve the system within, and did not work for generations.
No use playing the old game of blaming and counter blaming to hide the fact on ground.
When blaming socialism, communism and all isms what has been Democracy doing? playing a duplicity game with the world. On one hand declaring war on innocent country on false pretext and on the other calling a terrorists tyrant genocide committal country a friend and a best ally.
Not only that criticizing the communists countries brutal and gross violators of Human Rights violators on the other hand the democratic countries are not becoming members of the Human Right Commission and International Justice system .
Can there be more treacherous acts then this to ask everyone to follow the rule of law but not the proponents of such advocates themselves.
The days are gone when people were illiterate and did not understand the wicked intent of friend, now everybody understands each move of friends and foes.
How very treacherous of those countries when it is seen that overtly the countries are condemning a basically genocide committal country and covertly call it as the best friend and most trusted ally.
How that can be accepted. Therefore, it is better to keep shut blaming instead of praising the good work done by a country be it a democratic or a communist country. We must not be mean on seeing others thrive and do well.
By just saying we are civilized no one becomes civilized we need to behave like civilized people.
Having said all that I may conclude that china has achieved the hard earned objective and do deserve admiration but at the same time china needs to take care of excessive violation of damage done to Ecology to achieve such a world’s appreciable objective.
I cannot say more than this as my country is also not less a gross violator of ecology than many other countries.
May be more in many cases only because of the Republican Party’s non-cooperation that world community points a finger to the great country as the top violator. This is why we cannot raise our head high and confront all accusers.
Now, coming down to China being the world’s second largest economy. The world will not be surprised to see soon as the number one largest Economy of the world.
Why not? When America is squandering money in war and cannot substantiate Jobless benefit according to Republicans but sanctions billions to foreign country on none productive sector.
In addition, sanctions billions and trillions tax exempted money to a terrorist country keeping own citizen and job growing plan blocked by Republican party, what better can be expected to happen to the world’s largest economy is but to slip down to be one day world’s largest beggar’s Economy be sure of that my friends.
Well the Walmart syndrom is working great for China. And America is going down the tubes.
