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The FT continues: "Beijing has long fought against the “Japanification” of its economy, and has made huge investments in its high-tech, green and electric vehicle sectors with the goal of boosting long-term growth."What isn't said is that this was also Japan's strategy.
— Michael Pettis (@michaelxpettis) November 29, 2024
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At the time Japan dominated so many high-tech industries – and nearly all the fastest-growing high-tech consumer industries – that many if not most analysts believed that Japan would overtake the US technologically within a decade or two.— Michael Pettis (@michaelxpettis) November 29, 2024
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It is only when there is some mechanism to ensure that this investment generates greater economic value than it absorbs – typically the role of hard budget constraints – that it leads to longer-term sustainable growth. Without that mechanism, however, when losses are…— Michael Pettis (@michaelxpettis) November 29, 2024
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automatically socialized, more investment will often come at the expense of domestic demand and so, ironically, will be even more deflationary.In the end, only a relative rise in consumption will prevent the Japanification of China, not more subsidies to production.
— Michael Pettis (@michaelxpettis) November 29, 2024
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