Will China Enter a Lost Thirty Years Like Japan?
Based on the article, Japan’s economic decline was mainly caused by an excessively large price bubble. The real estate and stock market bubbles made Japanese corporate profitability look strong, which led to arrogant capital outflows as investors bought U.S. assets—with inflated prices, they ended up purchasing worthless real estate, only to be forced later to sell at a loss and return the capital to American investors. After the bubble burst, major Japanese corporations, despite still having profitability, were left burdened with significant debt. Japan then entered a phase of essentially working to pay off debts to foreign creditors, losing opportunities for technological investment and asset consolidation (the entire economic stagnation period can be seen as this debt-repayment era).
In contrast, while China’s real estate also has inflationary pressures, they were quickly curbed. The stock market has remained subdued, and although household and corporate debt appear high, China is nowhere near the point of working collectively to repay foreign creditors. Moreover, China’s domestic market potential is substantial, its resource base is relatively complete, and aside from technology dependence, it is not overly choked or constrained by other countries. The conclusion is that such conditions are unique to China—continue to be bullish on China.
Will We Become the Next Japan?
What Industries in Japan Thrived During the Lost Two Decades—and Their Lessons for Us
The RMB is about to break 7.5 against the dollar. Combined with foreign deposit rates around 5% versus domestic deposit rates falling to 2%, converting RMB into foreign currency effectively yields over a 10% gain. This will inevitably drive capital outflows. However, as geopolitical tensions intensify and RMB internationalization accelerates, future developments are uncertain. It may still be reasonable for wealthy individuals to purchase some foreign currency as a hedge to diversify risk.