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Op-ed: What Japan’s 1980s boom and bust can tell us about the Chinese economy

In the 1980s, Japan was the envy of the world.

Its economy grew rapidly to become the second largest in the world, led by a strong central government, a surging and increasingly productive manufacturing sector, easy access to money and credit, and protective trade policies that spawned huge surpluses with the U.S. Then the bubble burst, followed by three “lost” decades of economic stagnation. While history doesn’t repeat, it does often rhyme, and the Japanese experience may very well offer important lessons that are relevant for China, the current second-largest world economy. Three, in particular, stand out.

An aging population

  • China is aging at one of the most rapid paces of any major economy with remedies difficult to find.

  • The migration from rural to urban areas represents the biggest driver of a population that’s expected to decline at an accelerating rate over the next three decades. Urban living typically coincides with declining birth rates given the higher expenses.

  • Even with its more liberal 2-child policy adopted in 2015, China’s birthrate last year was the lowest in 70 years of communist rule.

  • An aging, shrinking population means China will need robust productivity growth to continue experiencing meaningful economic growth.

  • Similarity to Japan: This massive demographic headwind is almost identical to the pressure that hit Japan hard in the 1990s.


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