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

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.