Will China Repeat Japan and have a Lost Decade of its Own? | Macro Musings
Is it fair to say China is experiencing, you know, the first half of its own lost decade? I mean, is it is it going to follow what happened in Japan and slowly, you know, begin to recover after a decade or so? It’s a good question. The difference between China and Japan on that front is partly that the Chinese financial system is so much more state oriented. So I think people who live in western or at least capitalistic marketoriented societies have an idea that you know it’s a what goes up must come down sort of thing. There must be a financial bus somewhere. This must come. Now if China if the Chinese government I should say can continue papering over the consequences of this through the state banking system as they think they really have done so far. There’s been no you know major bank blowups because of this. um then it will be a different outcome. I think where the outcome will present itself is more through China’s long-term productivity, the productivity of capital investment, the productivity of uh of investment generally. Um which I tried to go into in the book. There’s there’s ludicrous examples of the ways in which uh investment in real estate has distorted Chinese productivity growth um in the last 20 years, especially in the sort of peak bubble era running up to the the three red lines uh being introduced. I think that’s the place to look for the consequences.
On this week’s episode of Macro Musings, Mike Bird discusses the conclusion of Abenomics, the origins of land as an asset, the surge in housing prices during the COVID-19 Pandemic, the unsuspecting story of Wolf Ladejinsky, how housing impacted Japan’s lost decade, the modern history of land in China, and much more.
Read the transcript or listen to the full episode here: https://www.mercatus.org/macro-musings/mike-bird-land-trap-and-how-history-housing-impacts-global-economy
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1 Comment
Their lost decade will look very different from our own.