China is now heading toward Japan-style economic paralysis if it doesnt change course -- Dec 08

At the end of 1989, Japan's bubble economy burst and its economic miracle came to an abrupt end. The Nikkei exchange fell from nearly 40,000 to its current 10,000 range. Today, China, in some ways, appears to be closer to following Japan than to sustaining its own economic miracle.

China's Shanghai Index (stocks) has fallen from a high of 7,000 in 2007 to a low of 2,000 for the past few years, and Chinese domestic investors have little confidence in their domestic stock market. The Japanese bubble, and its aftermath, was the result of a series of domestic financial and economic imbalances, many of which China faces today-to varying if not greater degrees.

Exploring similarities between Japan-in the run up to, and over the past two decades-and contemporary China is useful when trying to look a decade or two into the future to consider China's fate.

Most significantly, China's banking system mirrors Japan's from the mid-1980s until Japan's bubble burst. Both systems are arms of the state, which channel capital to fuel the "economic engine," favoring corporate growth to the detriment of the consumer: Japan favoring the interwoven, collaborative Keiretsu model and China promoting the growth of State Owned Enterprises (SOEs).

Chinese banks, repeating the experience of their Japanese counterparts, have overseen a fourfold increase in total loan growth in less than a decade, driven mostly by property-related loans. Between 40% and 60% of total loan value in the banking system is backed by real estate in one form or another. System-wide reliance on real estate as collateral may be particularly pernicious given the meteoric rise of property prices in China and the central role real estate bubbles have played in recent financial and economic crises. Real-estate bubbles have been one of, if not the, common denominator of every financial crisis over the past 20 years, from the US savings and loan crisis and the Japan bubble, to the Asian Financial Crisis in 1997 and the most recent global financial crisis in the US and Europe.

Property prices in Japan and China, driven by speculation (supported by the banks), were pushed to unaffordable levels, limiting and in some cases prohibiting, middle-class homeownership in each country. Government policies favoring the construction industry created the problem as both countries tried to "grow their way out of the problem" by "paving over the countryside" with infrastructure developments.

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Apr 16 Population declines for 3rd straight year
The nation's population has slipped for the third straight year to a 13-year low, the Internal Affairs and Communications Ministry said Tuesday. (The Japan News )
Apr 16 Experts to study bird flu infection route
Officials in southwestern Japan are trying to contain the bird flu virus that has infected chickens at a poultry farm. (NHK )
Apr 16 Methane hydrate surveys start in 5 areas in Japan
The Ministry of Economy, Trade and Industry said Tuesday that it has started surveys to measure shallow methane hydrate deposits in five marine areas in Japan. (Jiji Press )
Apr 16 Mizuno apologizes for ball defect in pro baseball
Japan's professional baseball league was facing another ball scandal Tuesday as sports equipment giant Mizuno apologized for a defect that turned the nation's top sport into a slugfest. (Japan Today )
Apr 16 Mt. Hiyori regains status as shortest mountain
Mt. Hiyori in Miyagino Ward, Sendai, has regained its status as "the shortest mountain in Japan" for the first time in 18 years. (The Japan News )
Apr 16 Young salmon released into river in Fukushima
Fishermen in Fukushima Prefecture have released young salmon into a local river for the first time in 4 years. (NHK )
Apr 15 Hakamada makes first public appearance as reprieve pends
Apparently perplexed but thrilled to find himself in the spotlight, Iwao Hakamada, formerly the world's longest-serving death-row inmate, made his first public appearance Monday in Tokyo since being released from prison and hospitalized. (Japan Times )
Apr 15 Spring festival in Takayama starts
The Takayama Spring Festival in central Japan kicked off on Monday with its traditional float parade. (NHK )
Apr 15 3 family members, one relative found dead in Aichi
Aichi prefectural police are investigating a possible link between the discovery of the bodies of a husband and wife and their eldest son, and the body of a male relative of the deceased family who was found hanging by his neck in a hotel. (Japan Today )
Apr 14 Taiwanese tourists hurt in deer rampage at Nikko
Visitors to one of Japan's most celebrated spots are being warned to be on the lookout, after two Taiwanese tourists were injured in a rampage by a wild deer. (Japan Today )
Apr 14 Body of missing worker from Okinotori atoll accident found
The body of one of two missing workers who died on March 30 after a floating pier overturned while being unloaded from a barge during construction work on a remote rocky atoll, was found on Sunday, the coast guard said. (Japan Today )
Apr 14 Mother, son killed after their car hit by police car
A 34-year-old woman and her 5-year-old son were killed after their car was hit by a police patrol car at an intersection in Tamba, Hyogo Prefecture, on Sunday. (Japan Today )
Apr 13 Man killed in hit-and-run in Yokohama
A 35-year-old man died after being hit by a car that kept going in Yokohama on Sunday morning. (Japan Today )
Apr 13 600 million dreamers
Mickey Mouse and friends celebrate the 600 millionth visitor to Tokyo Disney Resort's two theme parks (The Japan News )
Apr 13 'Galaxy train' aims to boost Tohoku area
East Japan Railway Co. launched a special train service on the JR Kamaishi Line in Iwate Prefecture on Saturday, using a restored C58 steam locomotive in a bid to help revive the local economy hit hard by the 2011 Great East Japan Earthquake. (The Japan News )