From Overseas Press
If only China were more like Japan
(chinadaily.com.cn)
Updated: 2010-09-06 14:18
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Like Japan's experience before, China may endure its own "lost decade" soon, "given similarities in the two growth models." However, Japan's economic decline has been a "gradual and comfortable one for the government and its people," while China's experience may be more traumatic, said an online article by the US Hudson Institute on Aug 31.
Some economists were warning about the "dangers of over-reliance on exports and fixed investment to drive growth" before there was conclusive proof that "Japan was in an extended period of stagnation." The country had advantages "intrinsic to the contemporary East Asia system, and with its clever, responsible and hardworking people, Japan was well-placed to manage the necessary transition toward a more sustainable growth model."
The similarities between Japan and China are striking. China is "nearing the end of its reliance on exports and fixed investment to drive growth and looking to shift toward policies that can enhance domestic consumption." In order to achieve this, the Chinese government can "concentrate on policies that need not sacrifice the country's long-term interests for short-term political expediency."
Yet China is becoming "more-rather than less-dependent on an unsustainable model to drive economic growth." Its "domestic consumption as a proportion of gross domestic product is actually declining. At just 30 percent, it is the lowest of any major country in modern economic history."
Similar models tend to lead to similar problems. "Worse, differences between the two political economies may bode ill for China." Japan had built "solid institutions: law, property rights and a stable political system when its economic malaise began."
Although Japan's model is often described as a "state-led approach, the private sector generally receive around three-quarters of the country's capital." So that even in a structural decline, most Japanese are living the "good life" and have "grown rich before getting old."