By Jason Theodorou

China is now the world’s second largest economy, after outstripping the Japanese economy in size and gross domestic product. Japan has seen poor economic growth, increasing by an annualized rate of 0.4% in the three months ending in June.

Japan’s GDP for the second quarter stood at $1.288 trillion, less than the $1.337 trillion GDP seen by China. It is now predicted that China will outpace the US as the world’s largest economy by 2027, according to Goldman Sachs. China has already overtaken the US as the biggest exporter for the automotive market.

China has seen growth increase by 10.3% in the second quarter in the previous year, while Japan has expanded by a sluggish 2%, and the divergence is expected to grow in the coming years according to leading economists.

China saw an increase in quarterly output in the fourth quarter of 2009, and ever since it has expanded significantly while Japan has failed to see the same rate of growth. Four of the world’s top 10 companies are from China, including PetroChina and China Construction Bank Corporation.

China outpaced Japan in purchasing power at least 10 years ago. Japan has struggled with slow export growth, while the yen is trading close to a 15-year high against the dollar.