Economy

China, Japan economic relations complementary

(Xinhua)
Updated: 2010-08-24 18:18

TOKYO - Japan-China economic relations can better be categorized as complementary rather than competitive, said Chi Hung Kwan, senior fellow of Nomura Institute of Capital markets Research in Tokyo Tuesday.

Kwan said because Japan's strength in areas including the high-tech is China's weakness, the economic ties are not "a zero sum game" that China's gain is Japan's loss, as some have worried as China is set to overtake Japan to become world's No 2 economy.

China's population is about 10 times of Japan's and the per capita GDP is only 1/10 of Japan's. Kwan argued, saying foreign leaders have to keep this in mind when dealing with China.

"Major indicators of economy, such as life expectancy, infant mortality rate, primary sector as a share of GDP, Engel coefficient, ... are examples that China are very similar to Japan 40 years ago, not just coincidence that Beijing hosted the Olympics 44 years after Tokyo and Shanghai Expo 40 years after Osaka," the veteran economist told reporters.

The economic ties have been closer and closer. China has already replaced the United States as Japan's largest export destination, which now absorbs 18.9 percent of Japan's total export.

In addition to trade, more and more Japanese companies are investing in China for local production, and a larger and larger proportion of local production in China are targeting the Chinese market rather than exporting to Japan or the United States, he said.

While dismissing the notion of "China threat", Kwan believed although China is still a developing country, it is emerging as a global power, and making a large share of global contribution.

"Twenty years ago, China's GDP is only 1/8 of that of Japan. This year it is about to surpass Japan. Last year, Chinese economy was about 1/3 of the United States, but the scenario that China will sooner or later surpass the US will become more and more realistic," he said.

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He went on saying when this will happen is depend on future exchange rate of the yuan to the US dollar and the economic growth rate.

"I expect that China's annual economy growth rate will decline from the current 10 percent level to 8 percent in the 2010s, and further down to 6 percent in the 2020s, and 5 percent in the 2030s, " adding that this is because the demographic features of an aging society and the drying up of excessive labor in rural areas.

"Given the rate yuan is appreciating 2 percent a year in the real terms, China is expected to surpass the US in 2026,"

"Although it will still take some time for China to become the world's largest economy, it has become a major engine of global growth. According to IMF statistics, Chinese economy is expected to grow 10.5 percent this year, raising global growth rate by 1.3 percentage point out of the total 4.6 percent, this will be far larger than the US contribution to the global growth rate, which is only 0.7 percent," he said.