IDEAS home Printed from https://ideas.repec.org/a/mnb/finrev/v24y2025i3p23-51.html

How Close Is China's Medium-Term Outlook to That of Japan? An Economic-Historical Perspective

Author

Listed:
  • Alicia Garcia Herrero

    (Bruegel, National University Singapore, Hong Kong University of Science and Technology)

Abstract

After decades of strong growth, China's economy began a steady slowdown around 2012. Current GDP growth is less than half of previous levels, and the trend is expected to continue. Since its real estate bubble burst in mid-2021, deflationary pressures have raised concerns that China may follow Japan's trajectory from the early 1990s. Both countries show similar structural traits: low private consumption, high savings and significant economic imbalances - China's even more so. Their policy responses have also mirrored each other: slow monetary and fiscal easing, focus on manufacturing and reliance on trade surpluses, prompting US protectionist reactions. Like Japan, China is offshoring production to counteract trade barriers. However, China differs in key ways: it is still a developing economy with more room for growth and is a far stronger geopolitical force than Japan was. This power both motivates US technological restrictions and gives China broader global leverage, especially in the Global South. Whether China will repeat Japan's path remains a crucial, open question.

Suggested Citation

  • Alicia Garcia Herrero, 2025. "How Close Is China's Medium-Term Outlook to That of Japan? An Economic-Historical Perspective," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 24(3), pages 23-51.
    • Handle: RePEc:mnb:finrev:v:24:y:2025:i:3:p:23-51
    as

    Download full text from publisher

    File URL: https://hitelintezetiszemle.mnb.hu/sw/static/file/fer-24-3-st2-garcia-herrero.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bayoumi, Tamim, 2001. "The morning after: explaining the slowdown in Japanese growth in the 1990s," Journal of International Economics, Elsevier, vol. 53(2), pages 241-259, April.
    2. Naomi Griffin & Kazuhiko Odaki, 2009. "Reallocation and productivity growth in Japan: revisiting the lost decade of the 1990s," Journal of Productivity Analysis, Springer, vol. 31(2), pages 125-136, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. W. R. Garside, 2012. "Japan’s Great Stagnation," Books, Edward Elgar Publishing, number 14624.
    2. Malmaeus, J. Mikael & Alfredsson, Eva C., 2017. "Potential Consequences on the Economy of Low or No Growth - Short and Long Term Perspectives," Ecological Economics, Elsevier, vol. 134(C), pages 57-64.
    3. Barseghyan, Levon, 2010. "Non-performing loans, prospective bailouts, and Japan's slowdown," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 873-890, October.
    4. Rafiq Sohrab, 2012. "Is Discretionary Fiscal Policy in Japan Effective?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-49, August.
    5. Mehrotra, Aaron, 2009. "The case for price level or inflation targeting--What happened to monetary policy effectiveness during the Japanese disinflation?," Japan and the World Economy, Elsevier, vol. 21(3), pages 280-291, August.
    6. Kato, Ryuta Ray & Miyamoto, Hiroaki, 2013. "Fiscal stimulus and labor market dynamics in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 33-58.
    7. Crafts, Nicholas, 2000. "Development history," Economic History Working Papers 22384, London School of Economics and Political Science, Department of Economic History.
    8. Xiangmin He & Shenrun Yan & Jingyun Miao, 2024. "The Influence of Zombie Enterprises on Quantity and Quality of Entrepreneurship: Does Banking Competition Matter," SAGE Open, , vol. 14(3), pages 21582440241, August.
    9. Miyazaki, Tomomi, 2009. "Public investment and business cycles: The case of Japan," Journal of Asian Economics, Elsevier, vol. 20(4), pages 419-426, September.
    10. Yuto Iwasaki & Nao Sudo, 2017. "Myths and Observations on Unconventional Monetary Policy -- Takeaways from Post-Bubble Japan --," Bank of Japan Working Paper Series 17-E-11, Bank of Japan.
    11. Katsurako Sonoda & Nao Sudo, 2025. "Is Macroprudential Policy Instrument Blunt? Empirical Analysis Based on Japan's Experience from the 1970s to the 1990s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 57(6), pages 1509-1557, September.
    12. Rebecca Riley & Chiara Rosazza-Bondibene & Garry Young, 2015. "The UK productivity puzzle 2008-13: evidence from British businesses," Bank of England working papers 531, Bank of England.
    13. Yumi Saita & Toshitaka Sekine, 2001. "Sectoral Credit Shifts in Japan: Causes and Consequences of Their Decline in the 1990s," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    14. Gerth, Florian & Briggs, Chad M. & Diaz, John Francis T., 2024. "Exit and Entry Dynamics of UK Firms in the Wake of the Global Financial Crisis," MPRA Paper 123325, University Library of Munich, Germany, revised Jan 2025.
    15. Ichiro Muto & Nao Sudo & Shunichi Yoneyama, "undated". "Productivity Slowdown in Japan's Lost Decades: How Much of It Can Be Attributed to Damaged Balance Sheets?," Bank of Japan Working Paper Series 16-E-3, Bank of Japan.
    16. Miyazaki, Tomomi, 2010. "The effects of fiscal policy in the 1990s in Japan: A VAR analysis with event studies," Japan and the World Economy, Elsevier, vol. 22(2), pages 80-87, March.
    17. Erol Taymaz & Ebru Voyvoda & Kamil Yilmaz, 2010. "Global Links and Local Bonds: The Role of Ownership and Size in Productivity Growth," Koç University-TUSIAD Economic Research Forum Working Papers 1020, Koc University-TUSIAD Economic Research Forum.
    18. Kyoji FUKAO & Kenta IKEUCHI & Hyeog KWON & YoungGak KIM & Tatsuji MAKINO & Miho TAKIZAWA, 2015. "Lessons from Japan's Secular Stagnation," Discussion papers 15124, Research Institute of Economy, Trade and Industry (RIETI).
    19. Aaron MEHROTRA, 2004. "Could Japan Target the Price Level or Inflation - What Happens to Monetary Policy Effectiveness during Disinflation?," Economics Working Papers ECO2004/02, European University Institute.
    20. Shin-ichi Fukuda, 2010. "The Rise of China and the Sustained Recovery of Japan," Chapters, in: Takatoshi Ito & Chin Hee Hahn (ed.), The Rise of China and Structural Changes in Korea and Asia, chapter 9, Edward Elgar Publishing.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mnb:finrev:v:24:y:2025:i:3:p:23-51. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Morvay Endre The email address of this maintainer does not seem to be valid anymore. Please ask Morvay Endre to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/mnbgvhu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.