China’s Economic Future Seen to Imitate Japan's, Says Expert

The forecast on the Chinese economy is seen to be similar to that of Japan, according to various experts.

Michael Shuman, a commentator from Bloomberg Business Week, said that the economic power of China's economic future is a bubble waiting to burst. This is a trend that is similar to the economic stagnation that Japan is facing today.

He said, "Yet these Asian neighbors have a lot in common, and that doesn't bode well for China's economic future."

Analysts from Goldman Sachs Investment expressed the same sentiment. They stated, "Just like Japan, we believe China will eventually face a period of much slower growth."

Rating agency Moody's agreed. In May, the agency said, "a prolonged period of sub-optimal economic growth and persistent deflationary pressures, or possibly even economic stagnation."

James Chanos, the founder of fund manager Kynikos Associates, said that China's state capitalism is similar to Japan, saying that both economies are "on steroids."

Factors such as increasing debt and an inflating property bubble are contributing to the inevitable downward spiral. This is similar to when Japan's total debt relative to national output jumped almost 80 percentage points, to 275 percent from 1980 to 1989.

Oxford Economics lead economist Adam Slater said, "A quarter of a century ago, the Japanese economy had a surprising amount in common with that of China today."

He added, "This should serve as a warning to China observers and investors today, especially as some of the same worrying signals are present in China--chronic overinvestment, high private sector debt, frothy asset markets and poor demographics."

However, Shuman thinks that China still can steer away from the trend because President Xi Jinping still has a solid grip on economic policies.

"Fortunately for China, nothing in economics is inevitable. Xi and his policy team can still swerve off Japan's course if they more forcefully implement the reforms they've promised," he said.