Japan-style crash looming over China?

> Xi Jinping moves to help Beijing avoid Tokyo’s pitfall

TOKYO: Sizzling property prices, a groaning debt load, wealthy tourists and tycoons willing to slap down eye-popping sums for art: China is starting to look like Japan before its economic bubble burst in the early 1990s.

The similarities are not lost on Beijing. President Xi Jinping has commissioned a study to help China avoid Japan’s pitfalls, according to Bloomberg, as growth slows and rating agencies sound the alarm over its debt.

Fears over China’s groaning debt load were heightened after the the International Monetary Fund (IMF) warned on Tuesday the world’s second largest economy was on a “dangerous” path, urging Beijing to take a more sustainable course and speed up structural reforms.

China was also downgraded this summer by Moody’s with the credit rating agency citing the country’s ballooning debt, sparking an angry response from Beijing.

Debt-fuelled investment in infrastructure and real estate has underpinned Chinese growth for years since the global financial crisis a decade ago decimated growth in Western markets that booming exporters relied on for growth.

Japan was the original Asian tiger, with growth surging at an average 9% annually between 1955 and 1973 in the long postwar boom, turning it into one of the world’s great economic powers. China has also basked in heady growth – replacing Japan as the world’s number two economy in 2010 – and has not seen a single recession in decades.

Japan too is groaning under a huge national debt, the legacy of monetary and fiscal policies aimed at boosting growth. Its debt load is more than 200% of its gross domestic product (GDP). China’s debt is around 260% of GDP, up from around 140% before the 2008 financial crisis.

Lessons from Japan suggest officials should have acted more quickly to bring in stricter banking regulations to keep lenders from over-extending themselves and better manage the economic slowdown. – AFP