China becomes second largest economy: FX Chief

China has surpassed Japan to become second largest economy of the world.
Unprecedented growth of Chinese economy in past 30 years has made this country the true economic superpower of the world. Rampant growth in almost every sector of the economy and huge infrastructure and energy demand has made China an engine of growth for world economy.
China surpassed UK and France in 2005 and then Germany in 2007 to become the third largest economy of the world. China may well take over US as largest economy of the world by 2025 as predicted by World Bank, Goldman Sacs and many others. Being on number 1 spot will depend upon how Chinese government changes its exchange rates.
“China, in fact, is now already world’s second largest economy”, said Yi Yang, China’s chief currency regulator, in an interview with China reform magazine posted on website (www.safe.gov.cn) of his agency, the state administration of foreign exchange.
But still, China is a developing country. Chinese per capita GDP is $ 3,800 which is a fraction of the GDP of Japan, US and other developed economies. China’s growth, many argue, is unbalanced as Yuan is still largely undervalued. Chinese government is still not ready to make Yuan a global currency. Tight monetary policy may become hindrance to growth and a cause for instability of Chinese finance in future. Recent steps from Chinese government to let Yuan appreciate against major currencies of the world are the signs that Chinese government might be on the way to let ‘Yuan be pegged by free market’. Amalgamation of Chinese economy with other economies will be possible only when China allows full convertibility of Yuan. Chinese government holds a reserve of $2.45 Trillion and it plans to stick with this reserves which means Yuan will be pegged against Dollar for some time to come in future.

Tagged as: China, Chinese Economy, US, Yuan