Ted Scott on the wire: China: can it learn the lessons from Japan?
In November I wrote a note examining whether China was a potential bubble that could burst. China has become increasingly integral to the global recovery story following the credit crunch, especially as some developed economies are showing signs of fragility as they have continued to be weighed down by the size of their debt burden. Last year I concluded that the scepticism about China's economic miracle was largely misplaced even though certain risk assets were clearly overvalued. In this piece, I revisit the doubts harboured about the Chinese growth story but with particular reference to what happened in Japan two decades ago.
Many bears of China have drawn the analogy of the Japanese growth story in the 1980s that resulted in the bubble bursting in 1990 and subsequently a protracted period of deflation and recession. The note looks at the similarities and contrasts between the two countries and asks what lessons the Chinese authorities can learn from Japan to avoid a similar fate.
What happened in Japan?
Despite the appearance of a vibrant modern economy, the story of the last two decades has been one of almost uninterrupted woe. During the last 20 years the economy has grown at an annual rate of just 1.1% as it has lapsed in and out of recession.
Article last updated: Mar 3, 2010
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