China passes Germany to become third-biggest economy

China's economy overtook Germany's in 2008 to become the world's third largest, underscoring the nation's increasing economic and political clout.


Gross domestic product expanded 13 percent from a year earlier, more than a previous estimate of 11.9 percent, to 25.731 trillion yuan ($3.38 trillion), the statistics bureau said on its website. That topped Germany's 2.424 trillion euros ($3.32 trillion), using average exchange rates for 2008.


China's economy is 70 times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free- market reforms in 1978. After overtaking the U.K. and France in 2005, China became the third nation to complete a spacewalk, hosted the Olympic Games and surpassed Japan as the biggest buyer of U.S. Treasuries.
"This number is just one more piece of evidence that China is one of the most important players on the global stage," said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong. The figure was released as China faces the weakest economic expansion since 1990 after exports collapsed because of the global recession.


German economic growth slumped last year, according to numbers released by the Federal Statistics Office in Frankfurt. Gross domestic product grew 1.3 percent, down from 2.5 percent in 2007.


Widening Gap
China's economy may now be as much as 15 percent larger than Germany's, Louis Kuijs, a senior economist at the World Bank in Beijing, estimated. He confirmed the calculation that it overtook Germany in 2008.


The U.S. economy is the world's biggest, followed by Japan's.


"If China continues to grow at its average rate in the past 20 years and if the U.S. does the same, it will overtake the U.S. in 20 years," said Tim Condon, head of Asia research at ING Groep NV in Singapore. "There's no doubt that that will happen -- it's just a matter of time." The nation's enlarged role in the global financial system was highlighted when it cut rates at the same time as the U.S. Federal Reserve and five other central banks in October to counter the deepening credit crisis. In contrast, Japan stood on the sidelines.


Stake in U.S. Economy
China is the biggest contributor to global growth and underpins demand for metals, grains and the exports of its Asian neighbors. It also has a big stake in the U.S. economy, holding $652.9 billion of U.S. Treasuries, according to Treasury Department data.


Since introducing free-market policies, China has lifted 300 million citizens out of poverty, according to the United Nations. Before the latest revisions, the nation's per-capita gross national income was 132nd in the world at $2,360, behind Angola at 125th and Azerbaijan at 126th and ahead of Tonga at 133rd, according to the World Bank.


"The size of China's GDP tells us something about how quickly it is getting richer compared to other countries but in terms of per-capita GDP it is still less than 10 percent as rich as Germany is," said Kuijs. The nation hosted the Olympic Games in August last year, sent men into space in September and aims to land a man on the moon by 2020.


Asian Financial Crisis
"We have overcome challenges in the past 30 years, from the breakup of the Soviet Union to facing down global sanctions, from the Asian financial crisis to the current global crisis," President Hu Jintao said last month. "Our international profile is rising and we will play an increasingly constructive role."


Global interests spanning African oilfields and South American mines are encouraging China to add to its military might. The nation sent ships to fight pirates off the coast of Somalia last month and will "seriously consider" building aircraft carriers, the Ministry of National Defense said.


"China's importance goes beyond even the ranking as number three because it's one of the only resilient economies in the world today," said Citigroup's Huang.


Still, growth is sagging.
The economy grew 9 percent in the third quarter of 2008, the least in five years. The fourth-quarter expansion, due to be announced, was 6.8 percent, the weakest since 2001, according to the median estimate of 12 economists surveyed by Bloomberg News. The nation's 4 trillion yuan stimulus package, announced in November, may help to limit the severity of the slowdown.


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