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Originally published Monday, February 14, 2011 at 4:39 PM

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China's economy overtakes Japan

Japanese officials Monday acknowledged that China's economy was the second-largest in the 2010. The challenges are apparent for the United States.

JAPAN'S drop in the world economic order was a dollop of wasabi in an open wound.

Officials in Tokyo acknowledged Monday that China's economy was indeed the second-largest in 2010, not Japan. The country has been in the economic doldrums since the 1990s, but still the news had to sting like Japanese horseradish.

China is thriving, if not broadly prospering, at home. The trajectory is upward, even as various economic measures lag far behind the Japanese and the United States, still No. 1, for now.

Japan never recovered from its own property and housing bubbles. A succession of prime ministers has struggled with a stagnant economy, government debt and an aging population.

The country's credit rating was downgraded last month, a humiliating prelude to Monday's announcement.

China is where the jobs growth is. Indeed, China is following the Japanese path, with a reputation for copying other people's ideas before they developed their national brands of excellence.

China's success plants seeds of tension at home. The Wall Street Journal reported Monday that the good news of economic growth in China raises awkward political questions about who benefits and when those economic gains will reach deeper into society.

Japan is a regional beneficiary of China's economic expansion, which replaced the U.S. as Japan's largest trading partner.

The United States' gross domestic product is two-and-a-half times the size of China's, but the furious pace of growth stirs predictions of China surpassing the U.S. as the world's largest economy by 2030.

The imperative is to stay competitive through education and innovation, and to continue to create jobs and household incomes that support our strong domestic markets.

The competition is intense, and there can be no letup. The consequences are real.

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