Is China headed for a Japanese-style balance sheet recession?
After the property and stock market bubble crash of the early 1990s, Japan spent almost a decade cleaning up its excesses in debt, production capacity, and employment across multiple industries. Now, China’s weak economic activity amid a housing correction has led many investors to draw comparisons with Japan’s balance sheet recession of the 1990s.
What you will learn:
- Despite the different pathways, there are several similarities between China now and Japan then that may augur a similar future of a period of prolonged stagnation.
- First, China looks to be repeating Japan’s mistake of avoiding early, decisive steps to clean up its balance sheets.
- Second, like Japan in the 1990s, a more widespread loss of confidence among Chinese consumers and investors in the post-bubble growth model is also emerging.
- Third, the demography of ageing is a key headwind for both in navigating to a consumption-led growth model.
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