August 18, 2010 – It’s Official: China is Number Two

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3) It's Official: China is Number Two. With China's (FXI) economy rocketing at 8%-13% quarterly growth rates, and Japan (EWJ) plodding away with meager 1%-2% rates, it was only a matter of time before the Middle Kingdom bumped the Land of the Rising Sun from its number two position in national GDP rankings. Chinese officials will be quick to point out that, according to IMF figures, their $3,600 per capita nominal GDP still qualifies them for emerging market status, compared to $39,731 for Japan, $46,381 in the US, and an amazing $104, 512 for Luxembourg. It is highly unlikely that China's standard of living will ever approach that of the US, although it will narrow the gap, possibly rising to $20,000 over the next 20 years in today's dollars. One country that might pull this off is  Taiwan (EWT), which offers investors a way to play China though the back door, and already has a per capital GDP of $16,392. China bumped its errant, breakaway province closer to achieving this last week when its Taiwan Affairs Office said it will honor Taiwan's bilateral trade agreements for the first time. One is already in the works with Singapore, and deals with others in the Asian region are expected to follow.

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Japan is Not Carrying Its Weight Any More