With China poised to surpass Japan as the second-largest economy, the decision by world leaders to make the Group of 20 nations the main forum for global economic coordination instead of the G-8 reflects the increasing power of emerging markets.
The CHART OF THE DAY tracks gross domestic product of Japan, Germany, the U.K., France, Italy and Canada against those of China and the combined output of Brazil, Russia and India, with forecasts through 2014, based on data compiled by Bloomberg from the International Monetary Fund. China’s GDP could overtake Japan’s in 2010, with the rest of the so-called BRIC nations following within a few years, the IMF projects. The U.S. economy will remain bigger than those of the BRICs and Japan combined through the period, data show.
“The G-8 has long since outlived its purpose,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc., credited with coining the term BRICs.
The G-8 oversees about two thirds of global GDP. The G-20 accounts for about 85 percent of global economic output and was created after currency devaluations plagued emerging markets from Russia to Thailand in the 1990s.
The G-20’s ascendancy reflects how the recent slump was led by housing and financial-market busts in major economies and the recovery is being driven by countries such as China. That’s a reversal from previous crises when the G-8 pushed the recovery effort.
The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
Is it time to short developed nations and long emerging markets?