We Are Number 2! We Are Number 2!

Get ready to chant the new slogan. From a post by Barry Ritholz on his Big Picture blog. The punch line is at the bottom and in bold:

China’s Economy Passes Japan (#2)

by Barry Ritholtz

Here’s a stat that seems all but inevitable: China’s GDP has just passed that of Japan, to become the 2nd largest country’s economy in the world, after the US. (note these are nations, and not regions, like North America, Europe, Asia).

“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.

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.

China overtook the U.S. last year as the biggest automobile market and Germany as the largest exporter. The nation is the world’s No. 1 buyer of iron ore and copper and the second- biggest importer of crude oil, and has underpinned demand for exports by its Asian neighbors . . .

While China’s output was also larger in the fourth quarter of 2009, Japan’s GDP rebounded to exceed China’s in the first quarter, according to data compiled by Bloomberg News. According to IMF data using purchasing-power-parity calculations to adjust for exchange-rate differences, China overtook Japan in 2001.”

Goldman Sachs chief economist, Jim O’Neill, notes that the 1.3 billion people in China will overtake the U.S.’ $14 trillion economy by 2027.

From my perspective, the US has suffered from a long string of bad leaders more interested in "projecting US power" than in making sure that the American people lived a good life and had a solid economy. They waged unnecessary wars and pushed economic policies that de-industrialized the US. The Wall Street financiers bought and sold politicians. The result is the new -- soon to be true -- chant: We Are Number 2!

Update 2010aug17: You can watch a Charlie Rose interview of two China watchers.

• James Fallows, a journalist at The Atlantic Monthly who lived in China for the last 4 years.


• Stephen Roach, a long time senior economic analyst at Morgan Stanley who just spent 3 years in China as the Chairman of Morgan Stanley Asia.

These two talk about the rise of China to #2 status.