Template-Type: ReDIF-Article 1.0

Author-Name: Alicia Garcia Herrero
Author-Workplace-Name: Bruegel, National University Singapore, Hong Kong University of Science and Technology 
Author-Email: alicia.garcia-herrero@bruegel.org
Author-Person: pga73

Title: How Close Is China's Medium-Term Outlook to That of Japan? An Economic-Historical Perspective

Abstract: After decades of strong growth, China's economy began a steady slowdown around
2012. Current GDP growth is less than half of previous levels, and the trend is
expected to continue. Since its real estate bubble burst in mid-2021, deflationary
pressures have raised concerns that China may follow Japan's trajectory from the
early 1990s. Both countries show similar structural traits: low private consumption,
high savings and significant economic imbalances - China's even more so. Their
policy responses have also mirrored each other: slow monetary and fiscal easing,
focus on manufacturing and reliance on trade surpluses, prompting US protectionist
reactions. Like Japan, China is offshoring production to counteract trade barriers.
However, China differs in key ways: it is still a developing economy with more room
for growth and is a far stronger geopolitical force than Japan was. This power both
motivates US technological restrictions and gives China broader global leverage,
especially in the Global South. Whether China will repeat Japan's path remains
a crucial, open question.

Classification-JEL: E20, E32, E44, F41
Keywords: China, Japan, economy, lost decade, savings, imbalances
Pages: 23-51
Volume: 24
Issue: 3
Year: 2025
File-URL: https://hitelintezetiszemle.mnb.hu/sw/static/file/fer-24-3-st2-garcia-herrero.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:24:y:2025:i:3:p:23-51