China's Economy To Slow Down Dramatically, Like Japan's In The 1990s

Japan was the prime threat to the US's economic dominance in the 1980s, but then things went wrong. Now, economists see worrying similarities between China in the 2020s and Japan in the 1990s.

Photo Insert: Lujiazui financial district, Shanghai, China

China faces high levels of debt, an aging population, a hostile US, and even a possible financial crisis, Harry Robertson and Andy Kiersz reported for Business Insider.

Name the Asian country. It has a rapidly expanding economy that has grown wealthy through exports. It has high levels of investment and debt and a ballooning property market. Its growing economic power threatens to overtake that of the US.

It could be China in the 2020s, but that was exactly how Japan was seen in the 1980s, when the country was hailed as an economic miracle and the principal threat to US primacy.

Its growth of 10% per year on average from the 1960s onward helped it become the world's second-biggest economy by the 1980s, when its corporate icons like Toyota and Sony threatened to replace American counterparts like Ford and General Electric.

Then it all went wrong when its massive asset bubble popped. What followed was an end to the miracle and a full-blown financial crisis that rocked Japan in the early 1990s, leading to a "lost decade" where the economy flatlined. "Japanification" has since become a shorthand for the brutal mix of stagnation and deflation that has lasted to the present day.

These days, the similarities between China and Japan are starting to worry economists. Like Japan in the '90s, China is dealing with high levels of debt, an aging population, a hostile US, and even the potential for a financial crisis. Recently, its own massive real-estate bubble is showing signs of bursting.

"The assumption that China's going to overtake the US as the world's biggest economy, I just don't think that's ever going to happen," Mike Riddell, a global fixed income portfolio manager at Allianz, told Insider.

A slowdown in the Chinese economy is the last thing the world needs in the 2020s, given that the country has accounted for around 30% of global growth in recent years, and could even lead to the "Japanification" of the world economy.

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