China Takes Number Two Spot
China’s consistently high growth rates, strong exports, and expanding industrial sector have been turning heads. So it may come of little surprise that China’s GDP recently surpassed that of Japan, making it the second largest economy in the world, writes the LA Times.
Though China's total output has surpassed Japan's before, this time analysts predict China won't relinquish its lead. "[E]conomists say China is poised to be ahead for good," reports the LA Times. “China's economy will almost certainly be bigger than Japan's at the end of 2010," agrees the Huffington Post, because "China is growing at about 10 percent a year, while Japan's economy is forecast to grow between 2 to 3 percent this year.”
Yet, the Huffington Post points out that China's growth has not been unequivocally beneficial.
China's rise has produced glaring contradictions. The wealth gap between an elite who profited most from three decades of reform and its poor majority is so extreme that China has dozens of billionaires while average income for the rest of its 1.3 billion people is among the world's lowest.
In China, per capital income was $3,600 last year, standing in stark contrast to Japan's $37,800 per capita income, according to figures in the Huffington Post article. This intrenched disparity highlights how using GDP — a country's total output — can mislead when used as a measure of prosperity. Accordingly, many Chinese told the LA Times that their country is not necessarily better off than Japan, a sentiment explored in this LA Times video.
So, while China has further cemented its economic superstar status by gaining the title, "Number Two Economy," to truly flaunt these laurels, the country must also address its pervasive poverty as well.
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GDP
This raises an interesting point about statistics. Often times they can be used to paint a picture that looks good at a glance, but when given a closer inspection, don’t mirror reality. This is certainly true, as you mentioned, with China’s GDP. While at first glance this statistic seems to imply that Chinese citizens are prospering, and that China must have a very low poverty level, the reality, as you alluded to, is very different.
Especially alarming is the fact that the gap between the rich and poor is widening. This gap is also largely divided upon urban/rural lines. According to the China Statistical Yearbook 2004, the gap between urban and rural Chinese citizens is expanding. In 1997 urban Chinese had a per capita income of 5,160 Yuan compared to a per capita income of 2,090 Yuan of rural Chinese. By 2003 urban Chinese per capita income was 8,472 Yuan compared to a per capita income of 2,622 Yuan of rural Chinese.
This trend is troubling because, as urban Chinese citizens continue make more and more, rural Chinese citizens will become poorer and poorer as they continue to make the same amount. The Chinese government must address the issue of the affect that inflation will have upon rural Chinese citizens.
GDP and China
GDP measures the size of an economy, and is useful for measuring relative industrial might and even military potential. If the GDP of Country A is bigger than that of Country B, perhaps A can be abstractly labeled as "more powerful". For the citizens themselves, GDP per capita (excluding the richest 1% of the population) is probably better for determining general quality of life, especially if combined with a "quality of life" index (Health, Wealth, Job Security ect...).
Economically, China seems to be where a number of Northern Atlantic states were during the 19th century industrial revolution. Income inequality was extreme, including factory workers on the bottom and owners of capital like Rockefeller and Carnegie at the top. That income inequality didn't diminish until after the Great Depression and World War II. What will be the catalyst for change in China?
While income inequality often rises during an industrial revolution, the poverty rate can drop (if one believes in trickle down economics). As evidenced by the increasing number of billionaires in China (noted in the first post), Chinese economic policy at this stage of development appears more focused on reducing poverty than reducing income inequality
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