Date 19 May 2009

The IMF World Economic Outlook has forecasted China’s GDP to reach 5.3 trillion US dollars in 2010, overtaking Japan to become the world’s second largest economy.  This is eight years earlier than the previous prediction.

 This comes after the Chinese government implemented its robust fiscal expansion and loose monetary policies which have helped China to continue its growth despite the global recession. Hence, with continued growth in domestic consumption and infrastructure investments, China’s GDP is forecasted to expand by 7.5% in 2010. Meanwhile, Japan’s economy, currently the world’s second largest, is expected to contract by 3.3 percentage points amidst deflation.

 Nonetheless, China’s per-capita GDP remains extremely low at $5,962 compared to Japan’s $34,100 in 2008. While this means that many in China are still living far below the poverty line, it also signifies the fact that there remains ample room for further growth even if China does overtake Japan as the world’s second largest economy.