Macro Economic Performance of China and Japan (2010-2011)

Topics: Inflation, International trade, Macroeconomics Pages: 7 (2205 words) Published: April 5, 2013
Macroeconomic performance
the people’s Republic of China and Japan
2010 & 2011

The World’s economy was hit by a devastating global recession in 2008. Most of the economies of the world are still recovering from its shocks. Unexpected events such as the earthquake in Japan and unrest in some of the leading oil producing countries in the Middle East also affected global growth in 2011.

The leaders of the World’s economy are the United States of America, the People’s Republic of China followed by Japan. In 2010 China surpassed Japan and became the second largest economy of the world. It is classified as an emerging market. China’s GDP was $5.9 trillion where as Japan’s GDP was $5.5 trillion, according to the World Bank statistics. Over the years China has shown steady growth. It’s most important sectors are agriculture and industry. China’s major exports include machinery, textiles, optical and medical equipment. It is world’s largest exporter of goods. The growth over the years comes from both private and public sectors. Rising Foreign trade is also a major contributing factor in its growth.

Japan is the world’s third largest economy. It is classified as an advanced economy. It focuses on technologically advanced products and is a world leader in motor vehicles and electronic equipment. On 11 March it was hit by one of the strongest earthquake ever recorded in its history accompanied by a tsunami (OECD, 2011). Besides resulting in a great loss of human life Japan also experienced massive economic damage. This had a short term negative impact on its economic output followed by an increase in spending on reconstruction. Supply chain disruptions were experienced by countries relying on Japanese parts and components in their industrial sectors.

Trends in the Economy
The trends in the economy can be studied by looking at macroeconomic variables. Indicators such a GDP, inflation, unemployment, balance of trade and the exchange rate can be used to determine the growth of an economy.

1. Gross Domestic Product
According to China daily’s article, China’s GDP growth in the year 2010 started with 11.9 percent in the first quarter and ended with 9.8 percent in the fourth quarter. The average growth rate of the year showed that China’s economy grew by 10.4 percent in the year 2010.The World Bank statistics also show the same growth over the year. In the first quarter of the year China’s exports increased as it expanded trade with emerging markets. These countries included Brazil, India and Russia. High property prices and low borrowing costs aided private investment especially in real estate. Increasing export performance, domestic demand and private consumption lead to an overall increase in growth.

The article also shows that in the first quarter of 2011, China showed a GDP growth of 9.7 percent and ended with 8.9 percent in the fourth quarter showing that China’s economy grew by 9.3 percent in the year 2011. The country’s nominal GDP reached $ 7.3 trillion in 2011 from $ 5.9 trillion in 2010, according to Word Bank statistics.

China has high external and domestic demand which helps its economy even in difficult times. A rise in consumption was seen as a result of increase in employment and wages. On the other hand investment has improved as a result of expanding infrastructure and real estate construction. China’s exports of goods and services as a percentage of GNP increased from 29.5 percent in 2010 to 31.4 percent in 2011, according to the World Bank statistics. Net exports positively contributed to economic growth (IMF, 2011).

Over a ten year period, Japan’s growth rate has been among the lowest in the list of advanced economies. The growth rate has been less than that of France, Germany, the US and many other economies (Treasury, 2011). In Japan, economic activity was interrupted in March 2011 by the earthquake and tsunami. Many countries...

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