What Japan’s Economy Can Tell Us About China - The New York Times

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And while this is hard to quantify, lots of people I’ve talked to say that Japanese society is far more dynamic and culturally creative than many outsiders realize. The economist and blogger Noah Smith, who knows the country well, says that Tokyo is the new Paris. Given the language barrier, I mostly have to take his word for it, although having been taken around Tokyo by locals, I can confirm that the city has a lot of vitality. True, that same language barrier means that Tokyo likely can’t play the same role in global culture that Paris once did. But the Japanese are clearly having great success with sophisticated urbanism; if you think of Japan as a tired, stagnant society, you’re getting it wrong. Which brings me to the question that I raised at the beginning of this newsletter: Will China be the next Japan? There are some obvious similarities between China now and Japan in 1990. China has a wildly unbalanced economy, with too little consumer demand, kept afloat only by a hypertrophied real estate sector, and its working-age population is declining. Unlike Japan in 1990, most of the Chinese economy is still well behind the technological frontier, so it should have better prospects for rapid productivity growth, but there are growing concerns that China may have fallen into the “middle-income trap” that seems to afflict many emerging economies, which grow rapidly but only up to a point, then stall out. Yet if China is headed for an economic slowdown, the interesting question is whether it can replicate Japan’s social cohesion — its ability to manage slower growth without mass suffering or social instability. I am very definitely not a China expert, but is there any indication that China, especially under an erratic authoritarian regime, is capable of pulling this off? Note that China already has much higher youth unemployment than Japan ever did.