BEIJING - China still has a long way to go to improve its economy, despite formally overtaking Japan as the world’s second largest economy, experts said.

Japan’s gross domestic product (GDP) reached $5.47 trillion last year, compared to $5.88 trillion for China, Japan’s Cabinet Office said on Monday.

Japan became the world’s second largest economy, after the United States, in 1968 on the back of its post-war recovery.

China overtook Germany in 2007 to become the world’s third biggest economy.

"It is not a surprise that China overtook Japan," said Lu Zhengwei, senior economist with the Shanghai-based Industrial Bank.

However, economists pointed out that China’s per capita GDP was only about 10 percent of Japan’s. "We should not overestimate our GDP figure as China’s population is 1.3 billion, 10 times bigger than Japan’s," said Yi Xianrong, economist at the Chinese Academy of Social Sciences, a top think tank. China’s per capita GDP was about $4,300 in 2010, and income levels have been falling behind economic growth for years.

Ma Jiantang, head of the National Bureau of Statistics, said in January that the country has a huge population, a weak economic foundation, few resources and many people are mired in poverty. "Therefore, while we take note of our expanding economic size and strength, we should also soberly understand that China remains a developing nation."

The World Bank estimates that more than 100 million Chinese people - nearly the size of Japan’s entire population - live on less than $2 a day.

The China Youth Daily described China’s expansion as an "empty happiness" as the country’s economic development was at the expense of cheap labor and environmental degradation, while the quality of life, including education, social security and healthcare, still lags far behind developed countries.

Yuan Gangming, research fellow at the Center for China in the World Economy at Tsinghua University, said that in the next three to five years, China is likely to maintain a growth rate between 8 and 10 percent. However, for an improved quality of life and healthy, sustained growth, the country must invest more in areas such as human resources, the underdeveloped western regions, and social security, he said.

Zheng Xinli, permanent vice-chairman of China Center for International Economic Exchanges, also said the country should continue its reforms and improve its economic structure to avoid the "middle-income trap". The term was coined by the World Bank to describe stagnation in a country when its per capita GDP reached $3,000.

"In the past 30 years, China developed because of reform and opening-up. In the coming two decades, we need more reforms to further unleash the potential of development," he said.

He predicted urbanization will be the biggest driving force for China’s economy. One person moving into a city can create economic value of 100,000 yuan, he said. In the next 10 years, 200 million Chinese people will move into cities and towns, with a potential to add 20 trillion yuan to the economy over the decade, he estimated.

Sustained economic growth in China also helps other economies in the world, including Japan. The Japanese Economic and Fiscal Policy Minister Kaoru Yosano said: "We welcome China’s economic advancement as a neighboring country," according to Kyodo News. Japan’s economy has benefited from China’s rapid growth, initially as businesses shifted production here to take advantage of lower costs, and as local incomes rose, by tapping an increasingly lucrative market for Japanese goods.

经过三十年的壮观增长，中国终于超过日本，成为仅次于美国之后的世界第二大经济体。日本内阁府发布的数据显示，日本2010年名义GDP（国内生产总值）为54742亿美元，比中国少4044亿美元，中国GDP超过日本正式成为第二大经济体。

大约10年前，中国还是世界第七大经济体，2007年超越德国成为世界第三。中国经济规模何时能超越日本一直是近些年来国内外经济学家关注的话题。

事实上，中国经济规模从去年第二季度起就超过日本。当时的数据显示，日本第二季度的GDP（国内生产总值）为1.28万亿美元，而中国的二季度GDP为1.33万亿美元。

中日两国全年经济排名的悬念直到昨天才正式揭晓。日本内阁府昨天公布的初步数据显示，去除物价变动因素且经季节调整后，2010年第四季度日本实际GDP环比下降0.3%，按年率计算下降1.1%，这是日本经济五个季度来首次出现负增长，最终，2010年日本名义GDP为54742亿美元，比中国少4044亿美元，这也是1968年以来日本经济首次退居世界第三。

美国《华尔街日报》用“一个时代的结束”来形容这一历史性时刻。中国社会科学院经济研究所研究员、日本东京大学社会科学研究所客座教授袁钢明昨天再次强调，国际上衡量国富国穷的指标是人均GDP，“目前中国人均GDP只是日本的十分之一，中国还是一个‘穷国’的事实并没有改变，国内媒体应该淡化这一变化，避免国际舆论借机再度炒作‘中国经济威胁论’”。