Emerging China: A breakdown of the move to number two

How is China able to sustain this level of growth during the global slowdown? We used some charts in FactSet Economics to determine which areas of China's economy are still emerging and why.

Secrets of China's Success

The composition of China's economy is changing rapidly. Historically an agriculture-based economy, the push for urbanization has brought agriculture's share of GDP from 30% to 11% over the past 30 years. In the meantime, the 'services' share of GDP has nearly doubled and is now at 43%, while industry and construction remain the core of the economy, making up 48% of GDP. Compare this to the United States, where services compose two-thirds of the economy.

Urbanization in China is also bringing more jobs to industry, construction, and services. The worker shift, on top of a continuous population increase, ensures an ever-growing, more productive workforce that can sustain economic expansion. Coupled with government policies of heavy infrastructure investment and the encouragement of foreign direct investment, China is well-positioned to continue to grow rapidly over the next decade.

Who is next?

Note that the recent elevation of China's status to the second largest economy in the world is based on a nominal USD GDP comparison. Many economists would point out that using a Purchasing Power Parity (PPP) measure, China passed Japan years ago. PPP takes into account relative price levels and consumer purchasing power between countries. By comparing GDP in PPP terms, India is the next country that will move up in the country rankings. The tables below compare GDP using these different measures.