Page last updated at 15:20 GMT, Thursday, 8 May 2008 16:20 UK
China & Japan: Rival giants

Graph of China and Japan's GDP

Japan emerged in the post-war period to become the unquestioned giant of Asia, and remains the world's number two economic power, measured by GDP, after the US. China is fourth, just behind Germany.

But Chinese growth has soared since the 1980s and it shows little sign of slowing. While China sprints forward, Japan inches along. While China has been enjoying double-digit annual economic growth - 11.9% in 2007 - Japan's growth has been more modest - just 2.1% in 2007.

Some indicators suggest China's economy has now overtaken Japan.

This fierce competition has led to conflicts in certain areas.

For example, both countries have a continuous thirst for energy, with Japan depending almost completely on imports for its oil and natural gas.

China does have energy resources in the form of coal, but it is in a very similar position in that it needs large energy imports, particularly of oil, to fuel its booming economy.

This situation has led to a dispute over the maritime borders in the East China Sea, where there are thought to be reserves of oil and gas. Both countries also claim islands within this disputed zone.

But between them they account for close to three-quarters of East Asia's economic activity, and despite the obvious competition economic ties have become closer in recent years.

In 2004 China overtook the US to become Japan's largest trading partner. China has become a huge new market for Japanese exports with bilateral trade reaching $236.6bn in 2007.

And in recent years there has also been an emerging trend of Chinese firms investing in Japan - although the figures remain low compared with Japanese investment in China.

The large sovereign wealth fund in China has also made overtures to invest in Japan, particularly in energy firms.

The two economies are in many ways complementary, as China wants Japanese technology and investment to help develop its economy further, while Japan wants to sell more of its products to the Chinese.

Country profile: Japan
14 Feb 08 |  Country profiles
Country profile: China
02 May 08 |  Country profiles

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