2023-07-29 04:40:52
Middle-income trap｜Will China’s economy repeat the same mistakes as Japan’s bubble burst?Nobel Laureate Kluman: It’s Worse
Mainland China’s economic recovery following the epidemic is sluggish, coupled with the disappearance of the demographic dividend, its economic prospects are worrying. Many people compare the mainland with Japan’s “lost 30 years” since the 1990s, and worry whether the mainland will follow Japan’s lead follow suit. Paul Krugman, who won the Nobel Prize in Economics and is a well-known New York Times columnist, compares the situation of the two countries in his latest column. He believes that China will not repeat the mistakes of Japan, because the Japanese economy is After the bubble burst in 1900, it was not as bad as the outside world imagined. On the contrary, China’s current economic prospects are worse than Japan’s at that time.
Japan’s economy is not bad following the bubble burst
Kluman wrote “Will China Repeat Japan’s Mistake?” “, the author pointed out that the economy of mainland China seems to be faltering recently, so will the future path repeat the mistakes of Japan? Kluman categorically said “probably not”, saying “the situation in China will be worse”.
He pointed out that Japan’s economy following the bubble burst was not at all the disaster imagined by many people, and many people ignored the most important factor in Japan’s relative decline – population. Japan’s working-age population has been in rapid decline since the mid-1990s due to low birth rates and a reluctance to accept immigrants. The only way for Japan to avoid a relative decline in the size of its economy is to achieve faster growth in per capita output than other major economies. Although Japan has not done so, since 1994, Japan’s per capita real income has increased by 45%, showing that this is not the case. Doesn’t fit the stagnant statement.
Kluman thinks it is inaccurate to say that Japan’s economy is stagnant.
Japan’s working population remains high
The second reason is that it has been hypothesized that countries with slow population growth often have difficulty maintaining full employment, but Japan has successfully avoided mass unemployment. The ratio of male employment in Japan’s golden working age (25 to 54 years old) has remained above 90%. It has always been higher than the world’s largest economy – the United States.
Also, Japan’s youth unemployment rate (ages 15-24) has been rising since the bubble burst, but has been improving since 2000. In contrast, the youth unemployment rate in Mainland China continued to deteriorate over the same period.
On the other hand, Japan’s huge debt that the market has been worried regarding will lead to a debt crisis, but it has not become a reality. “It’s not so much a cautionary tale, but rather an example of how to deal with difficult demographics while maintaining prosperity and social stability,” Kluman said.
Will China be the next Japan?
Will mainland China become the next Japan? According to Kluman, there are some obvious similarities between China today and Japan in 1990. China’s economy is extremely unbalanced, consumer demand is too low, the economy is maintained only by the over-inflated real estate industry, and the working-age population is also shrinking. The difference is that much of the Chinese economy is still far behind the technological frontier, so prospects for rapid productivity growth should be better, but he cautions that China may have fallen into a “middle-income trap” – growing rapidly but reaching To a certain extent, it will stagnate.
If mainland China is headed for an economic slowdown, can he replicate Japan’s social cohesion, its ability to manage lower growth without causing mass pain or social instability. Kluman is more pessimistic regarding this. He asked, “Especially under an unstable authoritarian regime, is it capable of doing this?” He also warned that China’s youth unemployment rate is already much higher than Japan’s.
He finally concluded that the situation in mainland China may be worse than that of Japan following the 1990s.
China recorded population shrinkage last year, the first in more than half a century.
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