Commentary: China rises while Japan falls

In the 1980s, when pundits mulled the supposed economic threat from Japan, few would have dreamed that Japan's sun would set so soon.

In the 1990s, Japan wallowed. In the second quarter of this year it was surpassed by China as the world's No. 2 economy.

For the quarter, Japan tallied a gross domestic product of $1.2 trillion. China came in at $1.3 trillion, just less than a third the size of the U.S. economy. Still, its performance marks what is perhaps the greatest economic transformation in human history: 300 million Chinese lifted out of poverty in the space of some 30 years. What was once a dirt-poor nation had become the world’s largest exporter and the biggest car market.

In 1978, China crawled out of the chaos of the Cultural Revolution and began putting market economics to work, first in agriculture and then in other industries. In the 1990s, the country grew at the breakneck pace of 10 percent or so a year.

Meanwhile, Japan's stock market and property bubble had popped and the country entered its "lost decade."

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