Asia’s two largest economies, China and Japan, present contrasting narratives as we approach the 2024 quarter.
China overtook Japan as the world’s second-largest economy in 2010. Today, Beijing is grappling with the same economic problems as Tokyo did in the late 1980s, which has led to what are known as Japan’s “lost decades. “The ongoing debate over whether China is willing to remain at its neighbor’s side in a long-term economic decline.
China posted a higher-than-expected expansion rate of 5. 3% year-on-year in the first quarter, having met its target of 5. 2% for 2023.
While some sectors, such as electric parts and EV charging stations, have seen notable growth, green shoots in key spaces such as exports were more visible in the first two months and declined in March.
Many experts on the subject, including China’s former No. 2 Li Keqiang, are aware of Beijing’s expansion reports.
China’s State Council has re-set a genuine GDP expansion target of “around 5%” by 2024. The International Monetary Fund (IMF) forecasts an expansion of 4. 6%.
At the same time, the Japanese economy has fallen from a rate of 1% of GDP in 2022 to 1. 9% last year. Japan’s Center for Economic Research has estimated that the country’s economy grew by 0. 54% in the first quarter of 2024 and forecasts expansion of 0. 73% for the 2024 total.
When it comes to GDP consistent with capita in nominal terms, i. e. not adjusted for inflation, Japan is the most sensible at $34,017 in 2022, reflecting its standard of living. China is estimated to have a GDP consistent with capita of $21,482, reflecting a larger population, a more unequal distribution of wealth, and its prestige as a middle-income country.
Demography plays a key role in shaping economic policies and growth.
In 2022, 69. 2% of China’s 1. 425 billion people were of running age (between 15 and 64 years old), according to the Organization for Economic Co-operation and Development (OECD). percent, after peaking at 72. 9 percent compared to the penny of the late 2000s.
Japan, with a population of 124. 9 million, has a lower proportion of people of running age (59. 4%), reflecting its aging population. The number of Japanese running age peaked at 69. 8 percent in the early 1990s, according to OECD data.
Chinese economists and demographers have pointed to the immediate aging of the labor force, along with the falling birth rate, as a call to action to fall into stagnation, as in Japan.
“Japanization” depends on China’s ability to reflect the experience of economic stagnation seen in Japan in the 1990s, after its asset bubble burst in the 1980s.
Proponents say headwinds such as China’s high debt levels, an aging population and the bursting of a housing bubble can lead to low expansion and a deflationary spiral. Opponents argue that China’s economy is larger and more diversified; More powerful state on the economy; and possible reforms, could help you avoid disaster.
“For more than three decades, Japan has struggled with a deflationary economy in which wages have risen, costs have risen and investment has increased,” Japanese Prime Minister Fumio Kishida said in a recent interview with Newsweek.
“For the past two and a half years, I have promoted a new form of capitalism, creating a virtuous cycle of expansion and distribution that would be triggered through wage increases, which in turn would increase income and incentivize corporations to do more. investments and raise wages,” he said.
He added that the economy is showing “positive signs” for the first time in three decades, with wage increases, record stock market performance and increased personal investment.
And as a result, for the first time in 30 years, the Japanese economy is showing signs of life. “
“There are valid considerations that the Chinese economy is beset by an over-indebtedness that is weighing on the monetary formula and stifling growth,” Eswar Prasad, a professor at Cornell University and a former International Monetary Fund official in China, told Newsweek.
“The government still has room for manoeuvre, but it will have to adopt vital market-oriented reforms, liberalisation of the monetary sector and more for personal businesses,” he said.
“Whether China suffers the same fate as Japan depends, therefore, on the government and its willingness to recognize the dire economic scenario and take steps to rebalance the economy and repair the confidence of the personal sector,” he added.
Japan’s Ministry of Economy and China’s Ministry of Foreign Affairs did not respond to written requests for comment.
Micah McCartney is a reporter for Newsweek Taiwan based in Taipei. It covers U. S. -China relations, security issues in East and Southeast Asia, and China-Taiwan ties. Send Micah tips or suggestions to m. mccartney@newsweek. com.
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