China and Japan Face Low Birthrate and Debt Crisis
Total Fertility Rate Falls Below Japan's
Economic Scale Faces Early Recession
Chinese Government's Stimulus Measures Lose Effectiveness
Amid growing concerns about deflation due to the real estate slump in China, there is a forecast that China will face an economic crisis surpassing Japan's "Lost 30 Years."
On the 17th (local time), The Wall Street Journal (WSJ) pointed out that China is repeating the crisis Japan experienced after the bubble economy collapse, and that the increase in public debt and low birthrate issues are even more severe than in Japan.
In particular, there are concerns about a slowdown in potential growth rate due to the sharp decline in birth rates. According to the China Population Development Research Center, China's total fertility rate last year was 1.09. This is even lower than Japan's total fertility rate of 1.26, a country that has long faced low birthrate and aging population as a social issue. With the significant decrease in birth rates, a "dead cross"?where the number of deaths surpasses the number of births?has appeared for the first time since the great famine in 1961. As of the end of last year, China's total population was 1.41175 billion, a decrease of 850,000 compared to the previous year.
Experts point out that the low birthrate phenomenon has appeared earlier relative to the size of China's economy. In Japan's case, the population decline era began only around 2008, more than 20 years after the start of its economic recession.
From the perspective of Gross National Income (GNI) per capita, there is also a view that China has rapidly encountered economic stagnation before reaching the ranks of developed countries. Last year, China's per capita GNI was $12,850, which is only 44% of Japan's GNI ($29,080) in 1991, right after the bubble economy collapse.
The public debt problem is also more severe compared to Japan in the early 1990s. According to JP Morgan, China's total public debt, including local government debt, accounted for 95% of its Gross Domestic Product (GDP) last year. Considering that Japan's debt accounted for only 62% of its GDP in 1991, this indicates that China's economic downturn is more serious.
The geopolitical conflicts China is currently experiencing also surpass the level of past trade disputes between Japan and the United States, WSJ analyzed. While Japan in the 1980s had frictions with the U.S. and signed the Plaza Accord, it did not experience a kind of new Cold War like China is now. Currently, the U.S. is imposing high-intensity, targeted sanctions on China, such as controlling exports of advanced semiconductor equipment.
However, despite these factors, there is criticism that China is not actively taking measures. The Chinese government has lowered the one-year loan prime rate, which serves as the benchmark interest rate, and reduced the down payment ratio and mortgage interest rates to stimulate the real estate market, but WSJ pointed out that these efforts have not yet been very effective.
Xiaoqing Pi, an economist at Bank of America, said, "The Chinese government is underestimating the long-term risk of economic stagnation and is making too little effort to address it," adding, "To return China's economic growth to a normal trajectory, easing policies must be implemented in a way that harmonizes monetary policy, real estate policy, and national fiscal policy."
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