China could be the next Japan: Merrill Lynch analysts

[Srinivas_K]

China could be the next Japan: Merrill Lynch analysts

China risks heading in the same worrying direction as Japan, a nation now synonymous with decaying first world economies, according to financial strategists.
The report by Bank of America Merrill Lynch has urged the Chinese authorities to act swiftly to prevent lapsing into a stagnant economic phase similar to its island neighbour's.
"In general, it appears to us that the problem facing China today may be more serious than Japan's," the report said. "We chose 2014 to be year zero because there are strong signs that the house cycle in China is tipping over."
"Tere are strong signs that the house cycle in China is tipping over.": Merrill Lynch.
"Tere are strong signs that the house cycle in China is tipping over.": Merrill Lynch. Photo: Bloomberg
Japan experienced remarkable growth in the second half of the 20th century to become the world's second-largest economy but derailed in the early 1990s. It is now mired in low growth and significant government debt.
While China was still growing rapidly, Merrill Lynch said it might have an even bigger debt problem than Japan.
The last few months have been full of increasing concerns about the Chinese economy from investors who are worrying about its resilience as the emerging economic powerhouse is buffeted by disappointing data, particularly in the residential property market that is a key economic driver.
But the Merrill Lynch report, released this week, is the first to suggest China may go the way of the first Asian tiger economy as bad debt accumulates rapidly and assets begin to deflate in value.
"If our assessment is correct, then banks, developers and building materials should start to underperform significantly reasonable soon," the report said.
The analysts said China's emerging issues were likely to continue as it was facing similar problems to those confronting Japan before its asset bubble burst after peaking in 1989.
These included imbalanced growth, government stimulus, overcapacity, an overwrought housing market, and a severely under-capitalised financial system.
But the report stops short of saying China is doomed, instead arguing the risks could be controlled or crises managed if the government recognises its looming debt crisis and takes appropriate steps.
Such steps could include paying down debt, an infusion of public funds into listed banks to bolster confidence and share values, and initiatives targeting the property sector.
"However, disappointingly, this appears to have not happened so far," the report said, citing the new leadership's reluctance to tolerate short-term government pain.
"We will unlikely see a resolution to the long-overdue bad debt recognition and financial system recap issue until the political dust settles. Unfortunately for the market, this appears to be at least a year or two away."




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[Ray]

Japan can rise.

Will China?

 

[faizan300]

China and Japan both are getting progress rapidly.

 

[Neo]

I am hearing this for the past ten years eversince I started debating in international fora. People were very hopeful when MM Singh was first elected, India was to conquer the world. Now Modi is power and the media hype begins all over.

 

[Dhairya Yadav]

I am hearing this for the past ten years eversince I started debating in international fora. People were very hopeful when MM Singh was first elected, India was to conquer the world. Now Modi is power and the media hype begins all over.

Under Manmohan Singh, India became 3rd largest in 2014 from 10th GDP(PPP) in 2004. His fall was because of other reasons. And why are you bringing India up here?

 

[mylegend]

Japan can rise.

Will China?

To the racist,
http://defenceforumindia.com/forum/china/63320-several-issues-misunderstood-most-indians.html
those post of yours prove your racism.

China may have a major crisis in the way. The world is watching, but more likely than not avoidable. However, your statement Japan can rise show your ignorance of economic history, just as your other ignorance with your racist post in Misconceptions thread. Japan have never climb out of their reccession. Therefore the term of lost decades. Japan have lost two decade, Abe is power less in the matter due to its aging population and low female labor participation rate. Japan is on track to third lost decade if what currently going on continue.

 

[Ray]

To the racist,
http://defenceforumindia.com/forum/china/63320-several-issues-misunderstood-most-indians.html
those post of yours prove your racism.

China may have a major crisis in the way. The world is watching, but more likely than not avoidable. However, your statement Japan can rise show your ignorance of economic history, just as your other ignorance with your racist post in Misconceptions thread. Japan have never climb out of their reccession. Therefore the term of lost decades. Japan have lost two decade, Abe is power less in the matter due to its aging population and low female labor participation rate. Japan is on track to third lost decade if what currently going on continue.

Stick and stones may break my bones, but stupidity cannot harm me.

To the Chinese money is all in life.

Japan does scare you, right?

When Japan exports from Nations that have the resources and cheaper labour, the economic gains to Japan is immense without the pains of being a resources denied nation.

Yessir, money filling the tills will do wonders for Japan.

And then there is the security arrangements!

One example: Russia cannot 'gobble' up Ukraine.

Guess why?

 

[amoy]

Bank of Japan cuts key interest rate into negative territory
by Jethro Mullen @CNNMoneyJanuary 29, 2016: 6:57 AM ET

the European Central Bank, among others, has already taken, resulting in bizarre situations where banks can end up paying customers who borrow from them. The idea has also been floated in the United States.

The Bank of Japan announcement Friday is the latest surprise move by its governor, Haruhiko Kuroda, in his drive to spur momentum in the world's third-largest economy. He had previously denied plans to take the interest rate below zero.

"Governor Kuroda has gained notoriety by changing course when it is least expected, and today's move will only serve to cement this reputation," said Marcel Thieliant of Capital Economics.

Related: Japan's master of surprise shocks with subzero interest rates

Investors responded positively to the announcement. Stocks in Tokyo rose 2.8% and the country's currency, the yen, fell against the dollar.

Financial markets' turbulent start to 2016 has been particularly punishing for Japan. Prior to the central bank's move, stocks had tanked around 10% in January, and the yen had strengthened.

The plunge in crude oil prices, meanwhile, has made it even harder for the Bank of Japan to hit its inflation target of 2%.

The central bank said the Japanese economy was in the midst of a moderate recovery, but it expressed concerns about plummeting oil prices and the uncertain outlook for emerging economies, especially China.

It's unclear how much difference subzero rates will make to the Japanese economy. The ECB has used them among an array of stimulus efforts, but the euro zone has continued to struggle with deflation.

"With interest rates already at record lows, we do not expect these measures to have a significant impact on the real economy, or inflation," said Izumi Devalier, Japan economist at HSBC.

Related: Japan economy minister to resign over funding scandal

The Bank of Japan's decision to introduce a negative interest rate was also far from unanimous. Five policy board members voted in favor, but four opposed the move.

Japan has long struggled with deflation, and prices have been stagnating despite the central bank'saggressive stimulus measures in recent years that include a massive bond-buying program. It said Friday that it was leaving its asset-purchase plan unchanged.

The bank's moves have come at a time when the government of Prime Minister Shinzo Abe has tried to jolt the economy into life by increasing spending and pushing through reforms. That program took a hit Thursday when Abe's economy minister announced his resignation over a political-funding scandal.

The Bank of Japan's announcement also follows closely watched statements from other major central banks amid the recent market turmoil.

Last week, ECB President Mario Draghi gave stocks a lift by promising that the bank could pump out more money as early as March if necessary.

The U.S Federal Reserve, which raised interest rates last month, said Wednesday it was "monitoring global economic and financial developments."

 

[Indx TechStyle]

I think declination of population is major cause of the problem.
Happened to Japan around 90s, could happen to China if conditions continue and could happen to India also after 2050.
As the country gets mature, birth rates fall, not marrying and divorces etc. increased.
People find the making family and taking it's responsibility useless.

But it won't happen to Pakistan and other Islamic Countries.
We all know how good are Pakistanis in family planning.
(Kyun @Neo bhai? )
We will have to maintain much higher GDP per capita to drive economy in future because Muslim countries will have much higher population.

 

[Compersion]

Japan reduced interest rates because it has a strong economy ?

Because there is not a strong economy ? is it to maintain their economy ... i think there needs to be a major reset and if not recession to re-calibrate and reconfigure a lot of waste and excess. perhaps even to extent of giving justification for the global economies to move away from such mindless interest rates that has risk of making economies be stagnant.

one thing for sure is that japan has strong innovation and technology and global reach

 

[Razor]

I think declination of population is major cause of the problem.
Happened to Japan around 90s, could happen to China if conditions continue and could happen to India also after 2050.
As the country gets mature, birth rates fall, not marrying and divorces etc. increased.
People find the making family and taking it's responsibility useless.

But it won't happen to Pakistan and other Islamic Countries.
We all know how good are Pakistanis in family planning.
(Kyun @Neo bhai? )
We will have to maintain much higher GDP per capita to drive economy in future because Muslim countries will have much higher population.

I think fall in population has to do with "urbanisation."
Almost half of china is still rural; so no problem for china on that front.

Next, china's one child policy, which I hear has been removed. So no problem there either.

 

[bose]

I am hearing this for the past ten years eversince I started debating in international fora. People were very hopeful when MM Singh was first elected, India was to conquer the world. Now Modi is power and the media hype begins all over.

Did you get what you are waiting for ? India do not want to conquer world but now is the fastest growing economy of the world... Long way to go for India for sure... The prediction about Chinese fake economy seems to be correct ...

 

[amoy]

In Japan: Chinese tourists spent an average of 14,870 yuan in the third quarter of 2015

Chinese tourists paid nearly 5 million visits to Japan in 2015—an increase of 107 percent from the previous year, according to Japan's official figures. China has become Japan's largest source of tourists; out of every four foreign visitors, one is from the Chinese mainland. In the third quarter of 2015, Chinese tourists spent an average of 14,870 yuan in Japan, 51 percent of which was spent shopping. The strong purchasing power of Chinese tourists has injected new vitality into Japan’s weak economy.

In South Korea: Per capita consumption of Chinese tourists reached 14,283 yuan in 2015

The number of Chinese visitors to South Korea is estimated to have been 6.11 million in 2015, accounting for more than 40 percent of foreign travelers to the country. Official data show the per capita spending of Chinese tourists reaches some 14,283 yuan in South Korea, more than twice that of other countries. In 2015, Chinese tourists' spending on accommodation, transport and shopping contributed 22 billion USD to South Korea’s economy, about 2.6 percent of the country's GDP.

 

[HariPrasad-1]

Chinkies are worse human material. Had they not been in such a dectatorial regime, they wold have been worse than Pakistan. Pakistani think tank Hasan Nisar said this and i fully agree with it. With a manpower like china, they can not grow more. Whatever they have achieved is more that what they deserve. The full credit goes to CPC. Their decline was very much due for a long time. It has begun now. They are not fit for any high knowledge base industries. What they can make in some cheap coppied things and with such a strength lying in copying and exploitation of man pwoer to achieve cost advantage, you can never remain a top economy for a long time. Soon we shall be the top economy with top in R & D and knowledge based economy. Chinkies are going to suck. It is now written on the stone.

 

[no smoking]

Soon we shall be the top economy with top in R & D and knowledge based economy. Chinkies are going to suck. It is now written on the stone.

Indians have promised a lot of things: R&D superpower, knowledge based economy, high-end manufacturing hub, the list can go on and on. But so far, we haven't seen any of them coming true.

In 1950s, China was nothing comparing to India on technologies;
In 1980s, China barely make herself on par with India;
Today, China is far ahead of India in almost every tech development index.

Now, you tell us that your-soon to be-greatness is written on the stone after so many years. There must be something wrong with your stone.

 

[HariPrasad-1]

Indians have promised a lot of things: R&D superpower, knowledge based economy, high-end manufacturing hub, the list can go on and on. But so far, we haven't seen any of them coming true.

In 1950s, China was nothing comparing to India on technologies;
In 1980s, China barely make herself on par with India;
Today, China is far ahead of India in almost every tech development index.

Now, you tell us that your-soon to be-greatness is written on the stone after so many years. There must be something wrong with your stone.

You are just ahead of us in quantity and nothing else. World's topmost companies are shifting their R & D to india. You remained a copy cat country. Your government exploited the people and make huge money and applied them in strategic sectors and reverse engineering. Still you remained a economy of cheap low end goods. Now decline has started in that sector also. Our economic development remained relatively slow because we are a democracy and can not exploit the people like you guys. However our development is robust and our people are getting rich. We have made an excellent development inspite of lots of constrains and without Human right violations. You opened up economy early and we did it late. that is why your economy is big. We shall catch up and surpass you by 2040 or 50 or may be much earlier. You guys are no where known for high IQ and do not occupy the positions which deserves high intellect level. From NASA to All multinational sectors to Medicine, we rule evry every where.We did that with our old generation. Our smart new generation is coming up. We will reach to a place and position which you can not even dream of.

 

[no smoking]

You are just ahead of us in quantity and nothing else. World's topmost companies are shifting their R & D to india. You remained a copy cat country. Your government exploited the people and make huge money and applied them in strategic sectors and reverse engineering. Still you remained a economy of cheap low end goods. Now decline has started in that sector also. Our economic development remained relatively slow because we are a democracy and can not exploit the people like you guys. However our development is robust and our people are getting rich. We have made an excellent development inspite of lots of constrains and without Human right violations. You opened up economy early and we did it late. that is why your economy is big. We shall catch up and surpass you by 2040 or 50 or may be much earlier. You guys are no where known for high IQ and do not occupy the positions which deserves high intellect level. From NASA to All multinational sectors to Medicine, we rule evry every where.We did that with our old generation. Our smart new generation is coming up. We will reach to a place and position which you can not even dream of.

Now I know, you definitely pick up the wrong stone.

 

[sasum]

Now I know, you definitely pick up the wrong stone.

Being totalitarian has some benefits. No opposition faced in economic decision making (compare with India's land acquisition, GST bills), no litigation against executive actions, flexibility to tweak human rights (China drafts prisoners in hazardous industries), can brush aside green- peace activism and so on. Moreover China is monolithic (almost all Han Chinese) as opposed to India's multi-cultural, multi-ethnic population. All these factors divert considerable resources to non- productive purposes. But still India has managed to strengthen its fundamentals. India will never face Greece like crisis or Europe's cyclical depression.