China is currently grappling with escalating economic woes, as exports and domestic demand have been experiencing a persistent downturn, while private investment has diminished and the once-booming real estate sector has been rapidly losing momentum.
While some analysts have suggested that China’s economy is now stagnating in a manner similar to Japan’s at the beginning of its “Lost Decade,” an economist points out that China’s problems are more serious than Japan’s were in the 1990s.
A lost decade is a situation in which a country or region experiences a prolonged economic downturn that lasts for about a decade. Typical examples include the United Kingdom after World War II, Latin America after an extended economic downturn in the 1980s, and Japan after the bubble burst in the 1990s.
China’s Situation Is Completely Different from Japan’s
Frank Tian Xie, an economic expert, told The Epoch Times on July 25 that China’s economy is clearly in a serious recession.Mr. Xie is a John M. Olin Palmetto chair professor in Business at the University of South Carolina Aiken.
Some people think that China may head to deflation. Mr. Xie indicated that it is still uncertain whether deflation is inevitable in China. However, China does face a serious problem with the bursting of the real estate bubble and shows early warning signs of a financial crisis.
“Some people say that China is in a situation similar to Japan’s ‘Lost Decade,’ and there are indeed some similarities,” Mr. Xie said. “It’s true that Japan experienced a stock market crash and housing market crash at the time, and the Japanese economy slowed down throughout the 1990s. As a matter of fact, the Lost Decade is more than a decade long, it has been extended into 20 and 30 years. But in reality, China’s current situation is still very different from that of Japan back in the 1990s.”
First of all, the over-investment and expansion of Japanese companies that led to the real estate bubble and the waste of resources were corporate actions, not government actions. Japan, as a nation, was not directly affected by the bankruptcy of these companies. In contrast, China’s problems were caused by a government-led situation, Mr. Xie said.
“Various local governments in China have all been involved in real estate. The debts of these governments, the debts of the financing platforms, and the highly leveraged debts of the state-owned banks due to real estate loans are all the problems of the government, or in other words, the problems of the entire population,” he continued. “The rich and powerful of the Chinese Communist Party, their business representatives in the real estate industry, and a few developers have benefited from this, but in fact all Chinese commoners are now in debt, which is very different from the situation in Japan.”
Consumption, fixed-asset investments, and exports together are referred to as the “three horse carriages,” the main driver of the Chinese economy.
Mr. Xie pointed out that in today’s China, all “three horse carriages” have stalled.
“China is experiencing a big drop for both imports and exports, an overbuilding of infrastructure, and a sluggish domestic demand, but Japan did not have these problems. For Japanese people, there has never been any problem with the living standard or consumption level, nor did they ever suffer such a high unemployment rate as in China,” Mr. Xie continued.
In retrospect, some analysts provided some new perspective on Japan’s Lost Decade, saying that despite a decade of economic recession, there were no serious social problems. In addition, Japan’s economic environment experienced steady changes since then, and Japanese companies also readjusted during this period and regained their technological leadership position as they have continued to advance their technology. So the situation is quite different from that of China.
“If you insist there is a similarity, on the surface, the bursting of the real estate bubble happened in both countries. But in terms of the actual problems, there is no comparison at all,” Mr. Xie said.
Economic Data Points to Depression
In June, China’s exports fell by 12.4 percent year-on-year, the biggest drop since February 2020. Total imports declined by 6.8 percent year-on-year, a decrease of 2.3 percentage points from the previous month. The performance of both exports and imports was below market expectations.On July 10, China’s National Bureau of Statistics released CPI data for all Chinese provinces in June. Among them, the CPI in 17 provinces decreased year-on-year.
In addition, the Producer Price Index (PPI) fell by 5.4 percent in June, a 0.8 percentage point higher than the decline in May. This marks the sixth consecutive month of expanding declines and the lowest level since January 2016, according to official data.
On July 15, the sales prices of residential properties in 70 large- and medium-sized cities in China were released as scheduled. The chief statistician of the National Bureau of Statistics interpreted the sales data, saying that the overall sales prices of residential properties in June were down from the previous month, and the performance of the real estate market in June still fell below expectations.
Chinese state media admitted that despite numerous real estate stimulus policies, the property market has cooled down since April, as a significant portion of home buyers who have a need to purchase a home still lack confidence in the market, holding a “wait-and-see” attitude.
A number of A-share listed property companies have been forced to be delisted in the past three months, because their share prices were below one yuan ($0.14) for 20 consecutive trading days, while more than 15 property companies on the Hong Kong Stock Exchange are still suspended.
China’s high youth unemployment rate has also raised alarms. The statistics bureau reported that unemployment among workers aged 16–24 hit a record 21.3 percent in June. However, Zhang Dandan, a scholar at Beijing University, said that if the around 16 million individuals—those who choose not to work and live off their parents—are all counted as unemployed, the actual youth unemployment rate in March was as high as 46.5 percent.
Even from the economic data released by the Chinese regime itself, the current economic situation in China is similar to that at the beginning of Japan’s “Lost Decade.” Given the CCP’s long history of falsifying all kinds of statistics to cover up problems, the real state of China’s economy is likely to be much worse.
