China overtook Germany to become the world’s third-largest economy in 2007. China’s National Bureau of Statistics said on Wednesday that the economy expanded by 13 per cent in 2007.

With only the US and Japan larger than China, the new figures highlight the rapid transformation that the Chinese economy has undergone during the past 30 years since Mao-era controls were eased, although it is experiencing the toughest period in a decade as a result of the global financial crisis.

“It is symbolically significant that China is now bigger than Germany and it will not be too long before its economy overtakes [that of] Japan,” said Mark Williams at Capital Economics in London.

In the medium-term, economists say that there is plenty of scope for China to maintain relatively high growth rates. Urbanization and technology catch-up have decades to run. Goldman Sachs forecasts that the Chinese economy will overtake that of the US by about 2040. The Economist Intelligence Unit forecasts in terms of purchasing power parity – which adjusts for price differences between countries to reflect actual buying power of local incomes – China will outstrip the US by 2017.

Germany’s economy has also slowed sharply, perhaps contracting by as much as 2 per cent in the fourth quarter, its statistical office said. First estimates, indicating that gross domestic product fell by between 1.5 per cent and 2 per cent compared with the previous three months, emphasise the downturn.

That is likely to intensify fears Germany’s recession will be the worst since the second world war, dragging down economies continent-wide. That would pressure policymakers to beef-up emergency rescue packages.