Broken China, Turning Japanese?

Some predictions fail to recognize that, after a significant adjustment, China’s economy will almost certainly rebound strongly. The question is how significant that adjustment will be and how protracted will policy responses make the correction.Set against a weak global backdrop, we have to believe that China’s ‘Japan 1989’ moment is inevitable, maybe not this year, possibly not next but before too much longer.We also do not know what will trigger the ‘moment’. It may be domestic events or it could be global slowdown. Whatever it is, China is facing a re-set of epic proportions which may shake its very socio-economic foundations.The important thing is how China reacts. If it fails to respond then it could face ‘lost decades’. The geo-political implications could be worrying as China’s recent expansion of its military technologies should not be overlooked. The reaction of the government and the general population is vital in determining the outcome.China is, in many ways, key to the future global economic outcome but China needs to re-set itself. It is very likely that it will re-set the global economy in the process. Having followed a path that is analogous to Japan’s there is a real risk that those opportunities may take two decades or more to re-surface. Broken China is turning Japanese – We really think so. Which way it turns next will have a vital bearing on the outcome of the future of the global economy as well as China’s