China’s real estate market is in decline. Debt deflation hangs in the air. The country’s workforce is shrinking and GDP growth is trending downwards.
No wonder the International Monetary Fund at its recent shindig in Marrakech warned of slowing economic growth in the People’s Republic, raising the prospect of “Japanisation” – the prolonged economic and financial malaise that afflicted its once high-flying neighbour after an asset bubble imploded three decades ago.
The trouble is that China’s economic imbalances are far worse than Japan’s in 1990. And that’s before considering the ruinous economic consequences of President Xi Jinping’s autocratic rule.
This is the best summary I could come up with:
What’s known as the Asian Development Model involves high levels of investment financed from domestic savings, relatively depressed household consumption and strong export growth.
Chinese private sector credit reached 227% of GDP at the start of this year, according to the Bank for International Settlements, some 13 percentage points higher than Japan’s 1993 peak level.
Huang, who teaches at the MIT Sloan School of Management, fears that Xi is resurrecting the bureaucratic mode of government that stifled China’s economic development for centuries in the imperial era.
The following year, authorities cracked down on private tutoring companies, and tech giant Tencent (0700.HK) agreed to pay $15 billion to aid the government’s wealth distribution efforts.
But the engines of the country’s growth – the private sector, globalisation and the decision-making autonomy of regional governments – have been impaired by Xi’s actions, says Huang.
This week, Beijing ordered state-owned banks to roll over local government debt with longer terms at lower interest rates.
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