Deflationary pressure, weak property prices, slowing growth, zombie companies. Is this Japan? No, it is China.
For years, policy makers in Beijing have seen post-1990 Japan as a cautionary tale. Now, in many ways, China’s economy of 2015 resembles that of Japan in 1995. That is a problem, not least for the Communist party. In the past two decades, growth in Japan’s real per capita income has averaged 1 per cent a year. If that is all Chinese leaders can muster over the next two decades, the chances are they will find themselves in the dustbin of history.
Fortunately for the men who run China, comparisons are overdone. The biggest difference is the most obvious. When Japan began its years of stagnation in the early 1990s it was already rich. On a per-capita basis, income was 80-90 per cent of US levels. China, as miraculous as its growth has been, is still nowhere near there. On a purchasing power parity basis, its per capita income is just above 20 per cent of the US level. That matters. It is easier for a poorer country to close the gap. For all its problems and inefficiencies — in fact, precisely because of its problems and inefficiencies — there are relatively easy things China can do to keep its economic show on the road.