Tiongkok will power thru existing economic rough spot without "Japanification"

[k1976]

China’s wobbly economic recovery unlikely to become full-blown ‘Japanification’​

• Sentiment towards China is bleak, but the differences between China and Japan are far more consequential than the similarities
• The bigger China’s vulnerabilities, the stronger the likelihood that Beijing will deliver the necessary fiscal stimulus to kick-start growth

https://www.google.com.sg/amp/s/amp...ikely-become-full-blown-japanification?espv=1

 

[k1976]

Concerns about the unevenness of China’s recovery have turned into deep misgivings about the underpinnings of growth and the timeliness and effectiveness of stronger monetary and fiscal stimulus. Morgan Stanley, one of a dwindling number of China bulls, said in a report published on June 20 that “we think it is fair to say without exaggeration that in our years of tracking China, investor sentiment has never been as bearish as it is now.”


This is partly because of mounting fears that China’s economy is suffering from the same malaise that plagued Japan following the bursting of its epic asset bubble in the early 1990s. To this day, that financial shock prevents the world’s third-largest economy from experiencing strong and sustained growth.

 

[k1976]

One of the most compelling analyses of what happened to Japan is the “balance sheet recession” concept pioneered by Richard Koo, chief economist at the Nomura Research Institute.

This is when monetary policy becomes ineffective because highly indebted households and companies are focused on paying down debt and are reluctant to consume and invest, even when interest rates fall sharply.


Not only is there strong evidence that this phenomenon was responsible for Japan’s post-bubble stagnation and deflation, signs of such a slump were also apparent in the euro zone and the United States following the 2008 financial crash.

 

[k1976]

Koo revived these fears last month when he warned that China was likely to enter a balance sheet recession and needed to take urgent action to head off a protracted, Japanese-style downturn.


He is not the only economist sounding the alarm over “Japanification”. Citigroup, which warned earlier this year that today’s China looks “strikingly similar” to post-bubble Japan, said last week that China was on the brink of a “confidence trap as the reopening impulse starts to fade”.


There are certainly worrying signs for “Japanisation” proponents to latch on to. The combination of record youth unemployment, lacklustre consumer spending, the threat of outright deflation, a festering crisis in the property market and severe strains on heavily indebted local governments carries troubling echoes of Japan in the 1990s.

 

[k1976]

First, because Chinese policymakers are sensitive to the mistakes made by Japan, it is unlikely they would allow a full-blown balance sheet recession to take hold. Beijing has had plenty of time to learn from Tokyo’s costly policy blunders.

Second, comparisons between China and Japan are inapt in several crucial areas. Not only did Japan allow the yen to strengthen sharply in the years preceding and following the bursting of its bubble, it kept real interest rates above the rate of economic growth and maintained an overly restrictive fiscal stance in the 1990s.


By contrast, China carefully manages its currency, ensuring the yuan trades in a tight range versus other major currencies. More importantly, China benefits from its state-owned financial system that makes a systemic crisis in the banking sector highly unlikely. Furthermore, strict controls on the country’s capital account significantly reduce the risk of major capital flight.

 

[k1976]

To be sure, worrying demographic trends, acute geopolitical tensions and much deeper global economic integration than in the 1990s make China more vulnerable in some respects.


Yet, the bigger the vulnerabilities, the stronger the likelihood that Beijing will deliver the necessary fiscal stimulus to kick-start growth. Renewed fears of a balance sheet recession in China could be the necessary catalyst to force Beijing’s hand.

 

[k1976]

https://www.scmp.com/business/economy/article/1733586/mainland-regulators-learn-mistakes-made-japan?utm_source=google_amp&utm_medium=Off-Platform-referrals&utm_campaign=3226763_inline_link&linker=1*nsl8a8*clientId*UW81aTBLQXpMQWJhS3pJSnM5amRJNHpUbG54aXE1RXRYSC0tbERsWHBEN192cEtkV3pMRTg2X3VzWDM1a0gtMQ..&_gl=1*t2dfch*_ga*YW1wLUhESzRpNUxsOXhDVTVCN1Jqc1BsZkxnUXpGRDBmVTRkOG5lUjBJSjhiNnVqQzdxZUhWYWREWWFHZVZETnFoZWw.

Mainland regulators learn from mistakes made in Japan​

Beijing has studied Tokyo's handling of the liberalisation of capital flows and the yen more than 30 years ago, and the asset bubble that followed​

 

[k1976]

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Mainland regulators learn from mistakes made in Japan​

Beijing has studied Tokyo's handling of the liberalisation of capital flows and the yen more than 30 years ago, and the asset bubble that followed​

Reuters
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Published: 8:15pm, 9 Mar, 2015


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Mainland regulators are turning to Japan for lessons on economic history, determined to keep the world's second-biggest economy from taking the same path of recession and deflation that has blighted its neighbour for the past 20 years.


Beijing views Tokyo's handling of the liberalisation of capital flows and the yen more than 30 years ago as key factors that led to the creation and subsequent bust of the asset bubble in Japan in the early 1990s, according to Japanese government and other sources who are in direct contact with mainland regulators.
"They aren't a single bit interested in Japan's successes. Their biggest interest is in Japan's mistakes," said one China-based source directly in touch with mainland regulators.

Mainland policymakers and analysts at government think tanks are well versed in the experiences of Japan and other countries, and the sources say two-way communication at both government and private-sector level continued even through a chill in diplomatic ties after a territorial spat in 2012.

 

[blackmondy]

Tiong-Cock is only good at 打咀炮. Whatever the CCPee emphasizes, that is exactly what it lacks.