Japan+Draws+up+Budget+for+Post-Tsunami+Building+-+Aria+Tedjarati

Article:

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China Overtakes Japan as World's Second-Biggest Economy =====

Source: Bloomberg [] Date Read: April 22nd, 2011 Date Written: August 6th, 2010

**Summary:** By the end of 2010, China has overtaken Japan as the world's second-biggest economy. In the second quarter of 2010, China's nominal gross domestic product (GDP) totaled $1.337 trillion, just managing to overtake Japan's $1.288 trillion. This dollar measurement of a country's economic growth is known as GDP, which is measured by adding together the value of all the final goods and services of a country, then subtracting imports (Consumption + Investment + Government + Exports - Imports). Although GDP tells us that China only recently overtook Japan's economy, we can see that by altering GDP to account for each country's Purchasing Power Parity, and thus adjusting exchange-rate differences, China technically had already surpassed Japan's economy back in 2001. However, even through the economic recession, China has experienced a long-running manufacturing boom and expansion of domestic industries and infrastructure. China's government has invested in many regions to build infrastructure, this leading to an increase in investment value. These well-built infrastructures attracted many foreign countries to invest in China, thus increasing the GDP. Although the GNP does not rise in the case of foreign assets operating domestically, GDP does take these into accounts, and thus this is a major reason why China has had such an increase in GDP.

**Vocabulary:**
 * ** GDP (gross domestic product) : the total dollar value of all final goods and services produced in a economy in a year ( **Consumption + Investment + Government + Exports - Imports)
 * PPP (Purchasing Power Parity) : takes into account the local buying currency (how much a certain amount of money can buy in different countries)
 * GDP per capita : Total GDP divided by population
 * GNP (gross national product) : GDP plus income earned by companies operating in foreign countries minus income earned by foreign companies operating domestically
 * HDI (Human Development Index) : Measures a country's education, health, and GDP per capita
 * Economic Growth : A steady increase in the level of real national income in a country between one year and another
 * Economic Development : A steady increase in the national welfare, human rights/freedoms, etc, in a country between one year and another
 * Gini Index : A measure of income (statistical) distribution

**Graph: N/A**

**Evaluation:** I personally think that the main idea behind this article is a complete fallacy. The only thing that the article is basing its thesis (that China's economy has surpassed that of Japan's) on is GDP. I don't think that GDP should be a measure of a nation's wealth. Even some bad things such as crime and war can easily boost an economy's GDP, thus making it look like the nation is a better place to live. For example, let us compare the differences between the standard of living in China and Japan. Under the human development index, Japan is ranked 11th in the world for human development, while China is ranked 89th! Furthermore, the Gini Index (ranked lower the better) for Japan is ranked 0.35, while China's is ranked 0.45, thus showing that China has a greater range of excessively poor people and excessively rich people. Also, the nominal GDP per capita of Japan is $42,325, while the of China is a mere $4,382. Of course, the PPP of China is stronger than that of Japan, but this significant difference in GDP per capita cannot be ignored. How can we say that China's economic growth has surpassed that of Japan's when its economic development and all the things explained above are much lower? This is a problem amongst many economists, and must be solved soon in order to be able to correctly measure a country's wealth.