Custom «China and Japan 2010-2011» Essay Paper

Overview

The Asian countries have an important place in the global centre of growth. Especially positive growth rates are shown by China and Japan. These are two countries, which combine old traditions and modern lifestyle. The joke that everything was made in China is just partly a joke. China is a wealthy country. After its transformation from an agriculture-based, centrally-planned economic system to an industrialized, market-oriented one, the country became even more successful (World Bank Indicator database, 2010-2011). Japan is a country with very poor natural resources, but with a great intellectual potential. We are going to compare macroeconomic performances of these two great countries.

The Assessment and Comparison

The economy of Japan grows at the slower rate than it should because of the disasters, which happened during last few years. Earthquake, tsunami, accident by the nuclear power station Fukushima caused slow economic development. China shows both high tempo of growth and high level of food inflation.

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The first point, which shows the success of the country's economy, is GDP. According to the Statistics Bureau of China, the GDP tempo in 2010 was faster compared to that in 2011. The GDP growth in China varied from 9.7 to 9.2 percent (National Statistics Bureau of China, 2010-2011). At the same time in 2010 it was relatively stable and was 10.5 percent (Index Mundi, 2012a). Data of the Statistics Bureau of Japan indicate the recession in Japan economy (National Statistics Bureau of Japan, 2010-2011). The real GDP in 2011 was 0.5 percent less than in 2010, when it was 4 percent. Generally, Japan was influenced by the earthquake, tsunami and the accident at the nuclear power station Fukushima, when the amount of the industrial output fell in March 2011 by 15,3 percent, compared with the previous year. For example, the amount of the industrial output of the Japanese enterprise Toyota was up to 63 percent less than in 2010. The positive dynamic of the industrial output became better and increased in May to 5.2 percent. So, the GDP rate in Japan was less than in China, even before the disasters. With this indicator China removed Japan to the world’s second largest economy.

The important things for each economy are the indicators of industrial output and investments. In China the increased tempo of the amount of industrial output and investments in the main capital stayed stable high in 2010 and 2011. So the increase of gross value in industry till the end of 2011 was 14.2 percent more than at the end of 2010, when it was 15.7 percent. The investment into the main capital during the 2010 was 24.5 percent, but in 2011 it grew up to 24.9 percent. In Japan the inner consumption and investment activity in 2010 were higher than in 2011. During 2010 the increase was 0.5 percent, and in 2011 expenses of the household fell to 1-0.5 percent because of the natural disaster. Thus, China is more attractive for investors and every year there are more investments in the economy of this country. Japan has lost its investment attraction because of its economic problems and volatility due to natural disasters.

Import and export are measures of successful trade in the country. In China the increased tempo of import is faster than export. Comparing 2010 and 2011, export grew to 22.9 percent and import to 26.7 percent in two years. The high increase in tempo of import is caused by the increase of energy resource prices, which took up 27 percent of the general import of the country. The main trade partners of China are countries of the European Union, the United States of America and Japan. China in 2010 exported to the United States of America and to the European Union general value of approximately 552.18 billion dollars (China US Focus, 2011). The possibility of a slowdown of the economic growth of China is very high, because of the reduction of export amount from China to the European Union, the United States of America and Japan. The reduction of economic activity in these countries can be the main reason of slowdown in trade.

The negative dynamic of the export in Japan showed the impact of the natural and anthropogenic disaster to the economy. The export in 2010 equalled 17 percent, and in 2011 it fell to 6 and till the end of the year to 5.3 percent. The increase tempo of import also reduced in 2011 from 11 percent (during the 2010 the import rate grew to this point) to 8.3 and later 3.4 percent. In 2010 Japan exported 769.8 billion dollars around the world. In 2011 Japan became the sixth largest exporter to the European Union after China. The general value of export goods was 67.6 billion dollars only to the European Union. The major part of export is to the Asian countries. However, if they reduce their demand, it can cause huge problems for the Japanese economy. Another cause of the increase of export in China is the low exchange rate of the Chinese currency, which is still lower than the fundamental indicators. The high rate of Japanese currency has negative impact on the export income. The official reserve assets of Japan till the end of 2010 were 1.1 trillion dollars and during the 2011 they grew to 1.2 trillion dollars. Japan is second after China in the world with the amount of reserve assets. So both countries are depended on their trade partners and on the rate of their currency.

A great risk for the Japanese economy is its state debt. The unbelievably high level of state debt in Japan is more than 199.7 percent of GDP in 2010 and about 230 percent of GDP in 2011. The extremely low and unstable increase tempos of economy and high deficit of the budget (approximately 8 percent of GDP) caused the difficulties in solving the debt problem. In this case China was in better conditions with its 43.5 percent of GDP both in 2010 and in 2011.

Another important factor is the unemployment rate and the rate of creation of new jobs. Till the end of 2010 the unemployment rate in China was 4.1 percent. In this year there were created over 11.68 million new jobs. According to Chinese unemployment rate on Trading Economics in summer 2011, the rate grown up to 4.3 percent, but then went back. Speaking about Japan, the unemployment rate in 2010 was stable – 5 percent and during 2011 varied from 4.7 percent to 4.5 percent. So the unemployment rate of both countries seems to have a small difference.

The negative tendency of development of the Chinese economy is the high increase tempo of food prices. The weather was partly the cause of this problem in China, so the food prices in 2010 were higher by 4.9 percent, especially prices of rice. And during the 2011 food prices grew to 12.4 percent compared with 2010. This year the CPI rate amounted 105.6%. In these conditions China activates a policy of restricting methods to avoid inflation, especially because the problem was not only with food prices, but with the overheating economy. Credit quotas were the problems, which the Chinese government also tried to deal with (The Economist, 2011). Japanese economy remains by the strategy of a deflationary pressure. The CPI was 100 percent, so deflation in 2010 was 0.0 percent and 0.2 percent in 2011. So China is solving the inflation problem. Japan is developing the strategy for its deflation rate.

Conclusions

The weak inner and investment demand has a negative impact on growth perspective of Japan. The main tasks of the Japanese government are regulation of debt problem, renewal of development in regions, which were damaged after earthquake and tsunami, encouragement of inner demand, timely relaxation of national currency for support of export and the whole economy in general. Speaking about China, it is worth mentioning that there are positive perspectives for its development, as well as potential risks, which can cause the slowdown of economic growth. The progressing slowdown of industrial production and the economy of China in general can be caused by the reduction of international demand and overheating of the inner market. However, the tempo of the increase in GDP of China remains to be one of the highest in the world. The development of the innovations and energy saving are the new priorities of the progress of China. The fast economic growth will enable poverty decrease.