Il sorpasso

Due to below par second qaurter Japanese GDP growth, China has overtaken Japan to become the worlds second largest economy. Bloomberg report

China surpassed Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower.

Japan’s nominal gross domestic product for the second quarter totaled $1.288 trillion, less than China’s $1.337 trillion, the Japanese Cabinet Office said today. Japan remained bigger in the first half of 2010, the government agency said. Japan’s annual GDP is $5.07 trillion, while China’s is more than $4.9 trillion.

China led the world out of last year’s global recession with an economy that’s more than 90-times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free-market reforms in 1978. The country of 1.3 billion people will overtake the U.S., where annual GDP is about $14 trillion, as the world’s largest economy by 2027, according to Goldman Sachs Group Inc. chief economist Jim O’Neill.

Although not everyone sees a smooth, inexorable rise for the Dragon economy. Geo-political analysts at STRATFOR see large imbalances building, the Chinese are sacrificing living standards for global market share and economic power.

STRATFOR thus sees the Chinese economic system as inherently unstable. The primary reason why China’s growth has been so impressive is that throughout the period of economic liberalization that has led to rising incomes, the Chinese government has maintained near-total savings capture of its households and businesses. It funnels these massive deposits via state-run banks to state-linked firms at below-market rates. It’s amazing the growth rate a country can achieve and the number of citizens it can employ with a vast supply of 0 percent, relatively consequence-free loans provided from the savings of nearly a billion workers.

It’s also amazing how unprofitable such a country can be. The Chinese system, like the Japanese system before it, works on bulk, churn, maximum employment and market share. The U.S. system of attempting to maximize return on investment through efficiency and profit stands in contrast. The American result is sufficient economic stability to be able to suffer through recessions and emerge stronger. The Chinese result is social stability that wobbles precipitously when exposed to economic hardship. The Chinese people rebel when work is not available and conditions reach extremes. It must be remembered that of China’s 1.3 billion people, more than 600 million urban citizens live on an average of about $7 a day, while 700 million rural people live on an average of $2 a day, and that is according to Beijing’s own well-scrubbed statistics.

Read more: China: Crunch Time | STRATFOR

STRATFOR CEO, George Friedman, goes as a far as predicting the breakup of the country in his book the “Next 100 Years“. To quote from their China Crunch Time article

STRATFOR sees a race on, but it isn’t a race between the Chinese and the Americans or even China and the world. It’s a race to see what will smash China first, its own internal imbalances or the U.S. decision to take a more mercantilist approach to international trade.

Read more: China: Crunch Time | STRATFOR

Others, including China perma-bull Jim Rogers, have recently expressed dismay at China’s continued policy of mercantilism as the Yuan has been revalued, but downwards in recent months. Worse, in a recent blog entry Ambrose Evans-Pritchard excoriated the recent export ban imposed by the Chinese on rare earth metals. Evans-Pritchard hints that this may be an attempt by the Chinese to force Western hi-tech hardware manufacturers to relocate to China which controls 97% of the rare earth metal market.

With the new super-power flexing it’s muscles in the South China Sea, and the US responding coolly at a move that could result in Chinese control of a shipping lane for half the world’s sea-freight (itself, perhaps, a response to US control of the Straits of Malacca – an essential region on the Chinese energy supply route), we can be sure China is going to loom ever larger in importance in world affairs over the coming decades..

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  • Greenflag

    Mack ,

    ‘or the U.S. decision to take a more mercantilist approach to international trade.’

    Was’nt that the approach that sparked the Japanese off on their Greater East Asian Co Prosperity Sphere ? The USA squeezing the Japanese on the scarce resources front i.e oil price and supplies ?

    China is holding a lot of at least short to medium term trump cards that the USA can’t hack away from easily .

  • Mack

    I don’t know. Could well have been – or they just wanted a fancy propoganda umbrella for their spanking new Empire. Either way, let’s hope history doesn’t repeat!

  • Greenflag

    ‘ let’s hope history doesn’t repeat!’

    History always repeats itself although not as expected . predicted or scenarioed . As I understand it the Japanese needed a bigger market for their fast expanding industrialised nation and in that ‘protectionist ‘ era with the colonial empires of Britain , France , Holland , Portugal all controlling the sea trade of East Asia the Japanese may have had little option but to fight their way to gain access to ‘oil’ and the American market . Post war USA opened up to Japanese trade as the latter became the western ideological buffer in the then stand off with East Asia /China . Standing at ground zero in Hiroshima many years after the war was a discomforting experience . An hour later strolling through the shopping areas of downtown Hiroshima was confirmation that humanity’s survival instinct remained and remains intact .

  • slappymcgroundout

    Do they not teach history in your part of the world? The Japanese received 80% of their oil from the US, back in the day when the US was a major oil exporting nation. The answer is in the piece itself. Note rare earth in China. Japan wasn’t looking for “market share”. Japan was looking for natural resources and figured all would be more secure if it controlled the resources rather than someone else. Korea was for resources and the transfer of some excess Japanese population. Then Inner Mongolia. Then Manchuria, which became the puppet state of Manchukuo. Then China proper. Then northern Indochina in an attempt to cutoff a route of Chinese supply. Then southern Indochina. Then Pearl Harbor.

    For the cruel and stupid of it all, well, Japan doesn’t control much in the way of natural resources as Japan is very nearly barren of such and they have no empire. Yet, Japan became an economic power nontheless. So some were horribly wrong in thinking they needed empire to become economic power. Millions upon millions died as a result. Wouldn’t want to be them when the time comes to stand before the Man (as it were). By the way, the first US embargo occurred after the occupation of northern Indochina (oil, scrap metal and war materials). Following occupation of southern Indochina the US froze all Japanese assets in the US and imposed a total trade embargo.

    Lastly, as regards China, the Japanese position was China for the Japanese. The US, British, etc., position was China for everyone but the Chinese. Hence Open Door for everyone but the Chinese for the US, British, etc., and Closed Door for the Japanese. On that matter alone, the respective positions were simply irreconcilable and war was a certainty.

    Almost forgot, but everyone always uses Hitler’s decision to launch Operation Barbarossa as his ultimate failure, i.e., opening a second front before the first front was closed. The Japanese accomplished the same result by choosing to take on the US, the British, the Dutch, the Australians, etc., before closing their front in China. Would have been much harder for the US and allied nations to go island-hopping had Japan had available in the Pacific the more than a million troops, etc., serving in their war in China.

    For one more, never ceases to amaze me, the obsession with Hiroshima and Nagasaki. When will some understand that you’re just as dead if I shove a no. 2 lead pencil into your head, through that thin side of either side of your head called the temple. If that weren’t enough, the one firebombing of Tokyo killed more than either Hiroshima or Nagasaki. So leave it to Greenflag to fly into Narita and not have discomfort until Hiroshima. See:

    For one more, the numbers used re the dead of Hiroshima and Nagasaki are the US numbers, from after the war. For the longest time, the Japanese had their own lower numbers. Only when it became expedient to use the higher US numbers did the Japanese decide to do so. Owing to the prior B29 firebombing, etc., of just about every other major Japanese city (Kyoto also excepted from the bombing), the Japanese had evacuated a large number of the inhabitants of Hiroshima and Nagasaki to the country. As related on the one site, re Nagasaki:

    In 1953, a report by the US Strategic Bombing Survey put the number of deaths at 35,000, wounded at 60,000 and 5,000 missing. In 1960, the Japanese put the number of dead at Nagasaki at 20,000 and the number of wounded at 50,000.

    Oh, and note re that Rense piece, that the thought was, since so many Japanese homes were made of paper and wood, that you’d have greater success in destroying the armaments factories if the paper and wooden houses surrounding the place caught on fire as the fire could then get swept up in the wind and spread to the armaments factory/ies. So when the Rense piece calls it “war on civilians”, well, not so much. The civilians were largely irrelevant, i.e., take them out to the country and we’d have still bombed the unoccupied paper and wood houses surrounding the factory.

    Truly lastly, Kyoto was spared any conventional, fire, and atomic bombing as our way of trying to communicate to the Japanese that we weren’t interested in destroying their national essence (their cultural and religion), as Kyoto is home to many of the most important Japanese cultural and religious shrines.

    Sorry, I lied, and so one more. Some always forget these items as well:

    “We of the peace party were assisted by the atomic bomb in our endeavor to end the war.”–Koichi Koido, advisor to Hirohito

    Hisatsune Sakomizu, chief secretary of the Japanese Cabinet said that the atomic bombs were a “golden opportunity given by heaven for Japan to end the war.”

    And since I’m on a roll, for more of our history proving the obsession over Hiroshim and Nagasaki, is just that, obsession, the US 10th Army estimated that 142,000 Okinawans died during the invasion and then battle for Okinawa. And Manila was the most destroyed Allied city after Warsaw. Somewhere between 70,000-80,000 Filipinos died in the liberation of Manila. Might I just ask all those who weep over the dead of Hiroshima and Nagasaki, who mourns for the Okinawans and the Filipinos of Manila?

  • Mack

    Interesting Slappy!

    Now, to get us back to our usual conversation of protectionism vs free trade, would you consider it true that Japan was only able to become an economic power post 1945 because the USA granted Japan relatively unhindered access to it’s markets and the natural resources controled by it’s corporations? Particularly when compared with the mercantilist policies pursued by most European empires (Britain post-Industrial Revolution excepted)?

    Game theory would suggest that what constitutes a successful (or at least rational / however brutal) strategy depends on what the other players are doing, by and large, in the age of empires, it wasn’t free trade..

  • slappymcgroundout

    If you meant to say that we allowed Japan to dump its exports here at below manfucturing-other cost prices, then yes. The more important factors, however, were: (1) dissolving the zaibatsu (industrial monopolies); (2) land reform, (3) improvement in educational system (better educated work force). All that was owing to US occupation. (4) the Korean War, when Japan produced a goodly amount of materials for US/UN forces. Call it the stimulus plan of their day. We should probably have a world war today (we can drop water balloons on dilapidated buildings, call them bombed out, and then rebuild them during our reconstruction phase). (5) import of foreign technology, helped them save much money in terms of research and development. (6) going back to my first comment, Japanese companies, the large ones, operate on razor thin profit margins. Helps them outcompete those who don’t operate on razor thin profit margins, i.e., they can gain market share and destroy their competition, and then they can increase the profit margin. (7) political stability. How long did the Liberal Democratic Party rule Japan? From 1955-1993? Helps to not have this policy and then another policy, then back to the first, then back to the second, and so on, each time party control of govt changes hands (helps keep the cost of doing business down, etc.). (8) close cooperation between govt and business. More so, not even close, than in any Western nation. (9) related to (8), as the govt can afford to be more cooperative owing to differing culture, meaning that Japanese management traditionally takes care of its workforce. Can’t say that here as we’d all be serfs without govt and govt legislation. But even during WWII, management of big business went more than out of its way to meet the essential needs of its workforce (providing clothing, food, etc., when the same became scarce in the marketplace).

    I should have otherwise added to my last that another reason for resource control is war, i.e., during war access to the raw materials of others might be ended and so how do win a war in that circumstance?

    Lastly, forgive me for attending to other affairs and so I couldn’t follow up on your and Comrade Stalin’s replies on that other piece. To address but the one, Comrade Stalin’s statement re differing ideas of efficiency, well, absolutely. Do you have a minimum wage law in your part of the world? If so, why? Isn’t the same “inefficient”? Couldn’t labor be procured for less? So why such a law? Now let me simply state that offshoring our jobs could be viewed as avoiding, rather entirely, US minimum wage laws. If you understand why the minimum wage law then you’ll understand why we can’t allow all that many jobs to be offshored (as we’ll end up in an even worse position than if we scrapped our minimum wage law). The one gal is correct, the value of human labor is taking and will continue to take a nose dive. Mass misery will be the result (some will experience a misery new to them while others having improved their condition will still be living in misery). But it won’t matter to those we here used to call robber baron scumbags.

    Almost forgot, but maybe instead of protectionism, the cost of a barrel of spot crude can rise to $300. That would keep the jobs home.

  • Mack

    What I meant is that prior to 1945 Japan couldn’t purchase the natural resources it needed to grow into an economic super-power on the open market, neither did it have unhindered access to large markets for it’s goods. Hence the empire building.

    Post-1945 liberalisation of trade with US allies in Europe and the defeated WWII aggressors, massively boosted Western (inc. Japanese trade) and economic growth. As a bonus it largely kept the world free from imperial conquest. I’m not sure if we’ll be able to say the same 50 or 60 years hence given the mercantilist policies prevalent in the State Capitalist Brics and OPEC oil cartel states.

    (Or you could contrast the impact of the relatively benign rise of Japan and Germany / EU as exporting powers post WWII with that of the mercantilist Chinese. Chinese policies are destroying US jobs, it’s their mercantilism and not free trade that is doing it..).

  • Alan Maskey

    Big essays there.
    Japan simply adopted the prevailing mercantilist ideology of the West and applied it more brutally. Mercentalism was Europe’s dominant ideology priot to imperialist lackey Adam Smith. Keynes paid tribute to it on several occasions.
    Now Japan does neo mercantilism.
    All these books on the “coming collapse” are pure bs. Sure China has many imbalances: lack of raw resources, big demands on water etc. But they are on the march and the future is theirs unless India can get enough friends to counter balance them.
    Hiroshima and Nagasaki were both war crimes, for which the perpetrators should have been hung. The Yanks later commemmorated it with a postage stamp; it is sad to see it being venerated here.
    Japan does not have a growing industrial base. The days of rapid Japanese growth are long over. Japan really took off during the Korean war when the Yanks needed someone to produce consumer goodies feeding into the US economy.

    Don’t credit the US with any benevolence. It is usually factually and historically incorrect; the USA works for the USA and screw everyone else.

    So, well done you godless Chinese. Be sure to read all the advice paupers are giving you. Meanwhile, I am looking forward to the showdown in the Straits of Taiwan and in Korea. I do note your troop concentrations in Southern Sudan, your involvementy in ending the Sri Lankan war and the naval lessons you learned when you cocked up in the Tsunami relief programme. Roll on Armageddon.

  • Greenflag

    Very good slappy a very good roll but I was NOT defending t Japanese ‘imperial ‘ expansion

    ‘ Might I just ask all those who weep over the dead of Hiroshima and Nagasaki, who mourns for the Okinawans and the Filipinos of Manila?’

    While you are on a roll you might also ask who mourns over the estimated one million Filipinos killed by the occupying Americans as the latter tried to emulate their European cousins in imperial annexation in 1899/1901 ?

    You can read up on it here below.


    But as Mack says back to the thread

  • Greenflag
  • Greenflag


    I agree generally with your reply to Slappy above .

    ‘it’s their mercantilism and not free trade that is doing it..).

    Are we not ALL mercantilists now despite our open /free trade credentials ? Ireland’s low corporations tax incentive is surely designed for accruing advantage to our small economy ? The advantage the Chinese have over western countries and others is as Slappy pointed out with the Japanese the greater degree of direct State control and direction of the economy .

  • slappymcgroundout

    Commondreams is hardly a credible source. (1) their dream isn’t common, only theirs. (2) they usually take the position that makes America look just that much the worse, and never mind the reality of the circumstance.

    Did you know that the low end estimate of civilian casualties is 200,000? Given that we lost 4,235 dead and 2,818 wounded, with Filipino combatant deaths some number around 20,000, only the fantacist (a word not unknown in your part of the world) would believe that 1,000,000 or 980,000 other souls perished. Here is a Filipino:

    By the way, this statement is laughable:

    “They never rebel in Luzon (Philippines) anymore because there isn’t anybody left to rebel…our soldiers took no prisoners, they kept no records, they simply swept the country and wherever and whenever they could get hold of a Filipino they killed him.”

    That would be news to my wife’s family, some of whom fought against US forces and some of whom fought in units allied with US forces. Or didn’t you know that there were native units that fought as US allies? I was otherwise unaware that the US forces left the island of Luzon devoid of human habitation. Can her Royal Twitness explain how there are millions of Ilocanos, Tagalogs, Bicolanos, etc., on Luzon today if her man is correct in his assertion? If they had migrated from elsewhere in the PI, they’d probably be speaking the Cebuano of the Visayan islands, and not Tagalog, Ilocano and Bicolano. So you know, the Ilocanos are up north there, look on the map for Ilocos Norte and Ilocos Sur. The Tagalogs are in the middle. The Bicolanos like my wife can be found in Camarines Norte, Carmines Sur and places more southerly on Luzon.

    For the laughable cherry on top:

    The resistance to the US interference has always been intense in the Philippines. Nationalist movements and armed struggle from the early occupation period to the Hukbalahap guerrilla movement after World War II to the New People’s Army in the 1960’s through to the present, including, of course, peasant movements for land reform, factory workers rights, on and on. In every instance the US administration and US military have worked in tandem with their Filipino government and military counterparts in an attempt to ruthlessly quell these movements.

    Has this twit ever been in the country? The NPA didn’t attack Americans. Neither did Luis Taruc & Co. (the Huks). And, yes, she visited, bottom lines of the piece, a single time in ’89. I know who she hung with. The same leftist morons, children of the rich elite, who attend university in Manila and rail on America and all things Western with copies of Das Kapital in their hands. Been there and seen that. Of course, once their college phase ends, they join the oppressor class of their fathers. Saw that too. And did I mention that when Ramos was having his amnesty program with the NPA that I dined and chatted with more than a few NPA cadres, some of whom are my wife’s relatives? Suffice to say that neither the Huks nor the NPA were fighting against “US interference”. If one were looking for a singular instance of the big lie, such is her claim here.

    And for how stupid Her Royal Twitness well and truly is, I was in Manila on the day that the American flag was lowered at Subic Bay. The Manila Standard had the headline of the following day, showing two groups of women crying. The women of the elite class who have the luxury of indulging their nationalism versus the women of the poor class who stood to endure an ever greater poverty owing to the loss of all that income associated with US military presence in the Philippines, everyone from civilian employees of the bases to bar girls (a point made by the Manila Standard, as it interviewed everyone from civilians employees to bar girls).

    Lastly, for yet even more on her Royal Twitness, does she not know the Aquino story? Cory couldn’t even keep her own family from raping and pillaging the country. Not everyone in the family is pious. She’s the singular exception And so her relatives raped and pillaged, just like the relatives of Ferdinand and Imelda did before them.

    Almost forgot, but perhaps you might travel to the Philipines with some Americans. Americans are very nearly universally welcomed with open arms in the Philippines. The exceptions are the leftist university wingnuts referenced above, and going back to our man who reported here on Slugger that he was present in southwestern Mindanao, the Moros, or Muslims of southwestern Mindanao and the Sulu Sea. Her Royal Twitness forgot to mention the common bond that was created by WWII. When Filipinos served alongside Americans in guerilla units. When Filipinos were burnt to death and skinned alive for daring to offer food to Americans on the march from Bataan to the death camps.

    Almost forgot, but a Filipino who calls out Her Royal Twitness:

    Filipinos like Americans generally unless they are one of the leftist. Even so, they do not hate Americans that are connected with any family members or a friend of the family. We like them as individuals. It’s not like some parts of the world that condemns even the presence of Americans. We love Americans but I guess that the blame game and debate that you see in the media starts when the issue becomes political… The leftist usually blames the US government and the Philippine government for some issues. I hope this sheds light. This is just my collected thought and my 2 cents as a Filipino and probably is different from other’s experiences. Good luck and don’t hesitate to visit.

  • greenflag

    slappymcgroundnut ,

    Thanks for the clarification . I now understand that the USA never killed civilians in Vietnam , the Philippines, Iraq, Afghanistan etc . It’s all lies just made up by people who are anti american . The Colonel Blimps of the old British Empire would have been proud to call you ‘chum ‘ 🙁

    Your neo colonialist credentials are improving 🙁 If the Soviet Union were around you’d have a promising career ahead of you in Pravda or Tass :

    You are aware of course that tens of millions of Iranians are now earnestly looking forward to being the next stop for the USA as it wars it’s way to fiscal and political bankruptcy and a double dip recession while it’s infrastructure collapses around it’s ears ? So widespread is this feeling of expectant liberty now in Iran that the USA’s Israeli allies are planning an experimental bombing in order to heighten the raised expectations of the Iranians 🙁

    If you find commondreams an incredible source then maybe this might help to uncloud your ‘americans can do no wrong while invading other countries ‘ pitch ?

    Philippine-American War

    Hostilities broke out on February 4, 1899, after two American privates on patrol killed three Filipino soldiers in San Juan, a Manila suburb. This incident sparked the Philippine-American War, which would cost far more money and took far more lives than the Spanish–American War. Some 126,000 American soldiers would be committed to the conflict; 4,234 Americans died, as did 16,000 Filipino soldiers who were part of a nationwide guerrilla movement of indeterminate numbers.
    At least one million Filipinos (1,000,000) lost their lives as a direct result of the war, with as many as 200,000 who died as a result of the cholera epidemic at the war’s end.Atrocities were committed by both sides.
    The poorly-equipped Filipino troops were easily overpowered by American troops in open combat, but they were formidable opponents in guerrilla warfare. Malolos, the revolutionary capital, was captured on March 31, 1899. Aguinaldo and his government escaped however, establishing a new capital at San Isidro, Nueva Ecija. On June 5, 1899, Antonio Luna, Aguinaldo’s most capable military commander, was killed by Aguinaldo’s guards in an apparent assassination while visiting Cabanatuan, Nueva Ecija to meet with Aguinaldo.[ Gregorio del Pilar, another key general, was killed on December 2, 1899 in the Battle of Tirad Pass. With his best commanders dead and his troops suffering continued defeats as American forces pushed into northern Luzon, Aguinaldo dissolved the regular army in November 1899 and ordered the establishment of decentralized guerrilla commands in each of several military zones. The general population, caught between Americans and rebels, suffered significantly.

    Aguinaldo was captured at Palanan, Isabela on March 23, 1901 and was brought to Manila. Convinced of the futility of further resistance, he swore allegiance to the United States and issued a proclamation calling on his compatriots to lay down their arms, officially bringing an end to the war. However, sporadic insurgent resistance continued in various parts of the Philippines, especially in the Muslim south, until 1913.

  • greenflag


    ‘commondreams is hardly a credible source.’

    It’s a lot more credible than yours . I will not risk exposing your source’s privacy on Slugger but anyone with a computer can expose your ‘credible ‘ source in ten seconds. .

    ‘Here is a Filipino:’

    I note the a as in A Filipino .

    Ireland and many other countries can list many of their own ‘individuals’ who not only applauded the conquerors and colonial powers but actively helped re write ‘history’ for them so as to ‘not look so bad ‘

    Funny the JP Morgan Chase and Texas connection don’t you think ? .

    BTW my other source was Wiki -no time to dig up more to help alleviate your imperial blindness !