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Challenges abound as China becomes 2nd largest economy

(Xinhua)
Updated: 2011-02-15 20:48
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BEIJING - With China's official ascent to the world's second largest economy Monday, analysts warned challenges still exist beneath the elevated ranking.

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Japan posted nominal GDP of $5.474 trillion last year behind China's $5.879 trillion, losing its long-held second place, behind the United States, to China, according to data released by the Japanese government Monday.

"China is still a developing country. Its GDP per capita is only 10 percent that of Japan, less than half the world average," said Cai Zhizhou, a researcher with the Center for National Accounting and Economic Growth at Peking University.

He said China lagged far behind Japan in terms of the development balance between urban and rural areas, economic growth and social development.

China's GDP per capita ranked about 100th in the world, according to statistics from the International Monetary Fund (IMF).

China has around 150 million people living below the poverty line set by the United Nations, those with earnings less than 1 dollar per day.

The yawning gap between the rich and poor, over-reliance on natural resources, lack of innovation, an imbalance between investment and consumption, and employment pressures are all factors that can threaten China's development if not properly addressed, say experts.

"Though China's economy is powering ahead, average earnings are not keeping up and the outdated development mode should not be ignored," said Ma Jiantang, head of the National Bureau of Statistics (NBS).

Recognizing the challenges, the government has pledged to address the imbalanced structure to achieve a more sustainable and healthy development mode in the next five years.

In an explanation of the Proposal on Formulating the 12th Five-Year Program (2011-2015) on National Economic and Social Development, Premier Wen Jiabao said accelerating the transformation of China's economic growth pattern was an urgent task for the country's development.

The government pledged to quicken the building of a new growth pattern that is jointly driven by consumption, investment and exports instead of the over reliance on manufacturing.

To close the gap between urban and rural areas, efforts should be made to push forward rural modernization, maintain coordinated development in rural and urban regions, improve public services and infrastructure construction in rural areas, and seek new ways to increase rural incomes, according to the program.

An array of other measures to promote the sound development mode, including raising people's incomes and adjusting the distribution system, were also included in the plan.

China's economy has witnessed astonishing progress in recent decades, and it can continue to tap its growth potential as long as it keeps facing up to the problems and challenges, experts say.

"China should further advance economic restructuring and guarantee the economic fruits are shared by the people," Cai said.

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