China Now World's No. 2 Economy, Shares Surge

Asian markets rose sharply Monday. In China the Shanghai Composite climbed 2.5% to 2,899 and in Hong Kong the Hang Seng gained 1.3% to end the day at 23,121. In Japan the Nikkei 225 Index advanced 1.1% to close at 10,726.

Investors piled into Chinese stocks after news broke that China's GDP surpassed Japan's for 2010, making the People's Republic the world's second largest economy after the U.S. with a total value of $5.9 trillion.

In addition, China's foreign trade for January topped $295 billion -- a year-on-year jump of 44%, according to China Daily. Numbers for both imports and exports were up, but left the trade surplus down by 54% for the month as compared with last year. There are also high hopes that data out tomorrow will show the inflation rate that has nearly doubled the price of garlic and ginger is finally receding.

Chinese Construction Projects Expected to Continue

Chinese cement makers surged among optimism that construction projects will continue to proliferate. Anhui Conch soared 8.2%. Metals producers also gained, with Jiangxi Copper rallying 5.7% and Zijin Mining advancing 3%.

Shares in highway companies rocketed ahead with Anhui Expressway, Hauxin Cement and Shenzhen Expressway all hitting the 10% daily maximum. Airlines also soared with both Air China and China Southern Airlines jumping 3.9% and China Eastern Airlines up 3.1%. Hainan Airlines rose 2.8%.

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Hong Kong-listed shares of cement maker Anhui Conch raced higher as well, gaining 8.6% in today's trading. China National Building Material zipped up 6.9%, cashing in on optimism about continued development in China.

Other big winners included Great Wall Motor, which is predicting higher profits once its bookkeeping for 2010 is completed. Shares raced up 6.1%. Other car makers also gained with Dongfeng Motor Group rocketing up 9.3% and Brilliance China motoring up 5.6%. Brilliance deals in minibuses and BMW, for which it officially manufactures versions of the 3-series and 5-series, as well as other BMW sedans. Byd, Warren Buffet's big bet, advanced 2.4%, but shares are still worth less than half of what they were at their peak in April.

Among Hong Kong retailers, Esprit climbed 5.1% and shoe company Belle International, gained 5.2%. Li & Fung bucked the trend, losing 0.9% in today's trading.

Japan Trailing in Third Place

In Japan, shares also rose despite the country's economy officially sliding into third place. Investors focused on the fact that GDP losses were less than expected. Winners included Honda, which jumped 2.8%, Toyota, which gained 2.5%, Nissan, which rose 1.4% and Mazda, which added 0.5%. Hino Motors, a maker of trucks and buses shot up 4.3%.

Electronics exporters were on the rise despite a decline in overall exports for the quarter. Pioneer shot up 6.1%, Olympus racked up a 6.1% gain and Sony gained 1.3%. Fanuc, the industrial robotics firm, surged 3.8%.