There is something more symbolic than substantial in China’s elevation to the world’s second largest economy, if it has actually happened as the new Japanese second-quarter gross domestic product figures are being taken to imply. There are so many statistical variables in comparing countries’ nominal GDP from the assumptions made in seasonal adjustment to exchange-rate fluctuations that the exercise quickly become pretty meaningless. Indeed, China, unlike Japan, doesn’t even produce seasonally adjusted figures, while for its part, Tokyo decided earlier this year to revise how it calculates its GDP, in part because its growth had looked so sluggish for so long, it wanted to spruce up the numbers.
China may already have overtaken Japan in nominal GDP terms some time back; some economists argue that China’s statistics are so rudimentary they undercount the economy’s size by as much as 20%. And in purchasing power terms, a more meaningful basis of comparison than nominal GDP, China has been the second largest economy for a decade. But then look at GDP per capita, and China lags Japan (and the U.S. and the E.U.) by a long way.
All that can be said with any certainty is that China’s economy has been growing rapidly while Japan’s has been becalmed, and that that has led to a shift in regional and global economic power in China’s favour. But then we all sort of know that.