China’s Rapid Growth during Slow Growth of Korea, Japan

This year, the World Economic Forum placed Japan sixth and Korea 26^th in the national competitiveness standings. But in the national competitiveness standings by the IMD in Switzerland, Korea rose by one notch to the 25^th spot, while Japan slid by six notches to the 27^th spot.

The Chinese economy is growing fast, while the Korean economy is growing steadily and the Japanese economy wanes. In terms of GDP (PPP) designed to compare the purchasing power of the citizens of each country, China passed the U.S. as China and the U.S. inked US$18.0881 trillion and US$17.3481 trillion, respectively, last year.

But the U.S. (US$17,968.2 billion) outclassed China US$10,356.5 billion) in the nominal GDP race. Last year, China’s per capita GDP reached US$7,572, which is the level of Korea’s in 1991.

But China’s per capita GDP is expected to break through US$10,000 in 2018 and US$12,117 in 2020. The gap between Korea’s and China’s GDP is expected to grow to 8.9 times in 2020 from 7.3 times in 2014.

In terms of amounts of foreign exchange holdings, China placed first with US$3.5140 trillion as of September of this year. Japan and Korea held second and seventh places, with US$1.2489 trillion and US$368.1 billion, respectively.

China overwhelms Korea and Japan in terms of military power and population. Comparing defense budgets, China’s defense budget was 886.9 billion yuan (US$140.0 billion) in 2015, while Japan allocated 4.9801 trillion yen (US$40.8639 billion) for its national defense in the same year. Korea recorded 37.456 trillion won (US$32.810 billion) as its defense budget in 2015. In 2014, China’s and Japan’s population added up to 1.3678 trillion and 127.06 million, respectively, in 2014. Korea had a population of 50.42 million the same year.

“China will top the world’s nominal GDP standings at number one in the middle of the 2030s and its per capita GDP will hover around US$30,000,” said Lee Bu-hyung, the head of the Northeast Asian Study Division at the Hyundai Research Institute. “Abenomics stopped the Japanese economy from falling in a slump, and has the potential to grow two percent in the next five to six years. Korea, China and Japan cannot help but ceaselessly compete with one another.”

Experts said that in order for Korea to have competitiveness that is stronger than that of Japan, Korea has to prepare measures to keep China in check. “China will rank first in the nominal GDP race in the world, and its per capita GDP will hit the US$30,000 level in the middle of the 2030s,” Lee added. “Korea cannot avoid endless competition with China and Japan. So Korea has to considerably change its industrial structure by utilizing its capital as efficiently as possible.”