China Becomes World's Second Largest Economy
China's GDP surpassed Japan's in the second quarter of 2010, making it the world's second-largest economy after the United States. The crossing was the result of three decades of reform-era growth since 1978, during which an estimated 800 million people were lifted out of extreme poverty.
Surpassing Japan
In the second quarter of 2010, China's GDP of $1.337 trillion exceeded Japan's $1.288 trillion for the first time, making China the world's second-largest economy behind the United States. Japan had held that position for 42 years. The crossing was not entirely surprising — China had been closing the gap rapidly — but it drew widespread attention, representing a major shift in the global economic rankings — the first of such scale since the United States overtook the United Kingdom in the late nineteenth century.
Three Decades of Growth
The milestone was the culmination of three decades of sustained growth averaging nearly 10% per year since Deng Xiaoping launched reform and opening-up in 1978. Over this period, China lifted an estimated 800 million people out of extreme poverty — the largest poverty reduction in human history. Manufacturing output expanded fifty-fold. China became the world's largest exporter, the largest holder of foreign exchange reserves, and the largest buyer of commodities from iron ore to soybeans.
A New Economic Superpower
China's rise as an economic superpower reshaped global supply chains, commodity markets, and geopolitical alignments. It financed US government debt through Treasury bond purchases, powered growth in resource-exporting nations from Australia to Angola, and became the largest trading partner of most Asian countries. By 2014, on a purchasing-power-parity basis, China's economy surpassed that of the United States, making it — by some measures — already the world's largest economy.
Narrative Comparison
| Source | Narrative |
|---|---|
| Beijing Official Account | China's rise to become the world's second-largest economy is a major achievement of the Chinese people under the leadership of the Communist Party of China, steadfastly following the path of socialism with Chinese characteristics and deepening reform and opening-up. Since the Third Plenary Session of the Eleventh Central Committee, the Party Central Committee has consistently placed economic development at the centre of all work, continuously liberating and developing the productive forces and driving sustained, rapid, and healthy growth of the national economy. Over three decades, GDP grew at an average annual rate of close to 10%, overall national strength increased significantly, the living standards of the people improved greatly, and more than 800 million people were lifted out of poverty. China's rise to second place among the world's economies fully demonstrates the superiority of the socialist system with Chinese characteristics and represents an important milestone in the great rejuvenation of the Chinese nation. This achievement is fundamentally attributable to the firm leadership of the Communist Party of China, to the joint efforts of all the country's peoples, and to the correct choice of steadfastly advancing reform and opening-up. |
| US Official Account | China's three decades of rapid economic growth represent a significant development in the global economy. As China has risen to become the world's second-largest economy, however, a number of its trade practices remain inconsistent with its WTO commitments. The persistent undervaluation of the renminbi has placed measurable competitive pressure on American manufacturers and workers. Inadequate enforcement of intellectual property rights and substantial government subsidies to state-owned enterprises create unfair competitive conditions for American firms. Market access barriers prevent American companies from competing on equal terms in the Chinese market. The United States welcomes a prosperous and stable China that plays a constructive role in international affairs. At the same time, China, as a major global economy, bears the responsibility of honouring the commitments made upon WTO accession and complying with international trade rules in areas including currency policy, export subsidies, and market opening. |
| Western Academic Analysis | Western scholarly work on China's rise to become the world's second-largest economy has concentrated on three core issues. The first concerns the drivers of the growth model: scholars have generally attributed China's high-speed growth to an export-oriented industrialisation strategy, large-scale inflows of foreign direct investment, an abundant supply of low-cost labour, and high-savings-rate-supported fixed asset investment — a development path situated within the comparative research framework of the 'East Asian developmental state' model. The second concerns the sustainability debate: some scholars have argued that China's economy remained heavily dependent on investment and export-driven demand, with relatively weak domestic consumption, a low share of services, and long-term structural constraints including an ageing demographic, growing environmental pressures, and widening income gaps between urban and rural areas and across regions — with the question of whether China could escape the 'middle-income trap' remaining a central and contested proposition. The third concerns global economic impact: the expansion of China's economic weight reshaped global commodity pricing systems, transnational manufacturing divisions of labour, and the trade structures of resource-exporting countries — with some researchers treating this as one of the most structurally significant power transfers in the international economic order since the postwar settlement. |
Key Milestones
- Third Plenary Session of the Eleventh Central Committee Convenes, Reform and Opening-Up Policy Launched
The Third Plenary Session of the Eleventh Central Committee of the Communist Party of China convened in Beijing from 18 to 22 December 1978. The session established an economic development line centred on economic construction and decided to implement the policy of reform and opening-up. The meeting promptly drove the introduction of the rural household responsibility system, the establishment of special economic zones along the coast, and reform of the state enterprise management system.
- China Formally Accedes to the World Trade Organisation
On 11 December 2001, China formally became the 143rd member of the World Trade Organisation, concluding fifteen years of accession negotiations. Following WTO entry, China gained most-favoured-nation treatment and broader market access, and its export volumes expanded rapidly thereafter. Between 2001 and 2010, China's total merchandise exports grew from approximately $266 billion to approximately $1.578 trillion — an increase of nearly sixfold — and China surpassed Germany in 2009 to become the world's largest goods exporter.
- Japan Releases Q2 2010 GDP Data, Confirming China's GDP Exceeded Japan's for the First Time in That Quarter
On 16 August 2010, Japan's Cabinet Office released preliminary GDP data for the second quarter of 2010, showing Japan's GDP for that quarter at approximately $1.288 trillion. China's National Bureau of Statistics had previously released figures of $1.337 trillion for the same period, confirming that China's economic output had exceeded Japan's for the first time in a single quarter. Japan had held the position of the world's second-largest economy for 42 years, since overtaking West Germany in 1968.
- Japan Releases Full-Year 2010 GDP Data, Annual Figures Confirm China Surpassed Japan
On 14 February 2011, Japan's Cabinet Office released Japan's full-year 2010 GDP at approximately $5.474 trillion. China's National Bureau of Statistics had previously published China's full-year 2010 GDP at approximately $5.879 trillion in January 2011. The successive release of annual data for both countries formally confirmed, on an annual-basis calculation, that China had surpassed Japan to become the world's second-largest economy.
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