China Ousts Japan As World #2, Trade Surplus Narrows

China passed Japan to become the world’s second largest economy in 2010 as breakneck growth drove the emerging powerhouse past its stagnant neighbor, according to The Wall Street Journal. On Monday, the Japanese government unveiled last year’s official growth data that showed an annualized 1.1% contraction in gross domestic product during the last three months of 2010 to bring its full-year GDP to $5.47 trillion. That figure is about 7% below China’s full-year GDP of $5.88 trillion.

The transition still leaves both countries well behind the U.S., which saw GDP of $14.66 trillion in 2010, although with 9.8% annual growth, China is expected to potentially double Japan’s GDP in the coming decade, and could rapidly narrow the gap to being the world’s largest economy. Meanwhile, the Chinese government reported that the country’s trade surplus shrank to $6.45 billion in January, which is less than half of the $13.1 billion recorded in December and surprised economists looking for a drop of about $2.5 billion. The headline figure was driven by a massive spike in imports that outpaced a rapid gain in exports, which suggests that currency appreciation may not be weighing foreign demand as much as expected.

Click here to read the story on China passing Japan from The Wall Street Journal.

Click here for coverage of China's trade surplus from The Wall Street Journal.