After decades of imitating Japan's export-oriented economic miracle, China appears, it becomes the same kind of economic coma, Japan is trying to wake up after 20 years from the danger.
China is trying to gradually get rid of its more advanced neighbors picked up a habit: to rely on exports and credit-fueled investment growth. Has left its lopsided economy, economists say, massive over-investment properties and industries are rapidly losing its cost advantage, from mining and automotive electronic products and textiles. Wages are rising, the investment return rate.
Growth decline, China's President Xi Jinping and Premier Li Keqiang, seem determined to avoid American-style financial crisis, widespread bankruptcies and unemployment.
Economists say, to prevent such crises, but may embalm lesions industry, stifling efforts to make economic growth more sustainable, but to create a kind of "zombie" banks and enterprises, sucked the life Japan's economy.
Add an aging population faster than the Japanese do, and economists worry that China may be trying the impossible.
"There is a tremendous amount of denial, saying:" People think that demographic is not important, the chief economist at Morgan Stanley Asia in Hong Kong Chetan Ahya. "I am worried about the risk of deflation."
Deflation may seem unlikely that economic growth remains clips and 7.5%, consumer prices rose by 2.7% a year. But economists warned that China is in many ways similar to the Japanese in 1989, two years before its collapse.
Like Japan, China relies on banks funnel investment into export industries to create employment opportunities and financial development. In return, the interest rate adjustment, to ensure the health of banks profits. Because the most profitable loans to those at least risk borrowers, banks concentrate large SOEs loans.
As the Japanese in the 1980s, China tried to make this part of the liberalization of the financial sphere, creating new sources of financing, the bond market and other non-bank loans. However, in Japan, which encourages banks to lend, not the more sensible is to help fuel the housing bubble. Matters worse, in 2009, China launched a 4 trillion yuan, credit support to weather the global financial crisis stimulus.
Despite Japan's credit expansion from GDP to 127-176%, between 1980 and 1990, China's credit growth of 105% from 2000, accounting for 187 percent of gross domestic product last year, JP Morgan Hong said.
Credit risk
China's problem now is that every dollar of new investment to generate new GDP reduction. Slowdown signs of deflationary pressures have been created: Producer prices have fallen by 16 months, Morgan Stanley noted that the real cost of borrowing was 8.7%, higher than the industry growth.
So this is a risk that China's reform to promote economic growth low enough to trigger a wave of defaults shake the entire financial system.
"It is very important to slow down credit growth, Grace said:" Wu, JP Morgan senior China economist in Hong Kong. "But if we slow deleveraging too much, you can have too much on the real economy downside risks."
Greater risk, she and others cautioned that, in order to avoid social unrest Beijing refused to endure such pain, rather than encourage banks to keep troubled borrowers floating rolling over like a Japanese bank loans, and in the 20th century, 90 years, to prevent them from lending lucrative new businesses may resume growth.
Beijing's efforts to blunt recent slowdown, thus drawing mixed reviews. Prime Minister Lee announced last week that Beijing would cut small business taxes and red tape is seen as welcome importers restructuring, while increasing investment in railways to speed up trade credit suspected mini rescue.
Likewise, some economists believe the central bank's move to eliminate the floor on lending rates this month, according to their risk, making the bank loan pricing as a positive step. Other people see the Japanese style of the "regulatory forbearance" approach to help them best customers, so they can save more on their own borrowers need to refinance bank loans.
"As profit margins will be reduced, the bank will try to increase the volume of loans and reduce their credit standards Wataru Takahashi said," who is now an economics professor at Osaka University, the former Bank of Japan official. "This is the Bank of Japan in the late 1980s, the story."
Japan can provide a solution
Some economists have warned against exaggerating the similarities. "Comparing Japan in the 1990s, is a bit too much, said:" Liao Changyong Rhee, the Asian Development Bank in Manila's chief economist.
China lower development, Rhee and people say, give it needs, affluent Japan does not have a reservoir. China's poor inland provinces do not suffer from overcapacity and before the Chinese needed infrastructure projects, now may look like white elephants, it will not take long.
China's push to put more people into their city represents another source of economic growth.
However, lower development also makes it harder to resist the weak job growth or stagnation of wages. And urbanization may not be as effective as it once was: more than half of China has been in the city, in rural areas the average age is around 40, rather than the population prone to move to new career opportunities.
Ultimately, it is the demographic most likely to put China firmly on the Japanese deflation leads. Because of its one-child policy, China's working-age population has begun to shrink. This is the Japanese in the 1990s, what had happened, resulting in lower consumption growth sharply lower.
The solution may lie - somewhere - In Japan, the government is fighting deflation with aggressive new policies to reduce borrowing costs, increase government spending, although it has not yet implemented a few of them, eliminating bottlenecks to growth.
"Need two things to avoid deflation after the credit binge, and said:" Ahya at Morgan Stanley. "One is good fiscal and monetary response, the second is the structural reforms."
 



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