Will China's Economy Burst, Japan-Style?

Some nervous observers in China are seeing too many similarities between the current state of the Chinese economy and what happened to Japan in the 1990s. For starters, the super-rich are cranking up real estate values, and the middle class is paying the

China's future could go in two directions (
China's future could go in two directions (
Wang Guopei

BEIJING - Will China become the next Japan? Will its economic bubble burst? Should the Chinese brace themselves for deep deflation and economic stagnation? These questions have begun to swirl ever since stock prices and real estate values started to soar.

Even though the Chinese stock market did crash some years ago and hasn't fully recovered since, housing prices have continued to rise, making for some striking similarities between China now and Japan before the appearance of the its own asset price bubble.

After the 1985 signing of the "Plaza Accord" to depreciate the dollar, the Japanese yen began to rapidly rise in value. By the early 1990s, Japan's stock and property markets had gone into a major slump. This is the period that is generally called Japan's bubble economy.

Xu Xiaonian, a well-known Chinese economist, has laid out the scenario that worries many: when China has replaced Japan as the world's second-biggest economy; and when China's bank loans to GDP ratio has overtaken Japan at its bubble peak; and when the Japanese tourists waving little flags in Paris and London are replaced by the Chinese who take off their shoes to air their feet; and when the Chinese have outshone the Japanese as buyers of art and luxury goods...all I pray is that China won't ever become another Japan.

What should be pointed out are the other similarities under the surface of the two economies: both countries have very strong exports to the United States and both enjoy a huge trade surplus; both currencies face pressure to appreciate with respect to the dollar; and both countries have huge foreign reserves. Domestically, both governments have carried out large-scale stimulus plans and have set in place looser financial and monetary policies. This has resulted in skyrocketing land and housing prices as well as investment speculation.

In order to study more rationally the probability of China's economy bursting, I sought the advice of many Japanese economists, including Heizo Takenaka, Japan's former Minister of Economy and Finance, as well as Yukio Noguchi, the specialist on Japan's bubble economy. Just as there are various reasons given for the cause of the bubble, these economists offer a range of opinions as to whether or not China will follow in the footsteps of Japan.

After speaking to the Japanese experts, I concluded the following: China's probability of becoming a bubble economy mainly depends on two factors - urbanization and the gap between the rich and poor.

China's economic bubble issue is a real estate issue and the bubble exists mainly in the real estate market. China's real estate prices are unreasonably high, simply because there's more demand than supply. The open question then is whether there is too much demand or too little supply?

In China, land supply is largely monopolized by the government, so many people attribute the shortage of land supply to the government. But even more people tend to think that the problem lies on the demand side.

A false prosperity

This is due to people's expectations of continuously increasing urbanization and rising property prices. Certain Chinese people invest large portions of their assets in real estate. Among them, the main purchasing power comes from a small group of people who own most of the wealth in Chinese society.

This minority represents the party of demand. Housing prices are determined by the level of their wealth. Real estate has become, alas, a real luxury.

Meanwhile, another population, the middle class who are neither rich nor poor, is sucked into the game as "house slaves' because of their strong desire to live in a house of their own. Left behind are the poor who can only signal their discontent. This is the basic structure of demand caused by the seriously uneven distribution of wealth.

Thus appears a false prosperity: strong demand for real estate in a market created by the rich. They speculate on the basis that a rising number of people who already live in the city will want to own their own house, and push up demand even more.

Although the logic is correct, it is difficult to quantify demand accurately. Unfortunately, under the permanent pressure of such simple logic, the rich are bound to get sucked into a market frenzy. They will finally end up in a speculative game, without having time to consider whether or not there will really be so many buyers for the houses they have invested in. Imagine a giant version of what has happened over the past few years in Spain.

In the just-finished National People's Congress, Wen Jiabao, the Chinese premier, announced the government's determination to regulate housing prices so as to cool the overheating market.

At the same time, the income of the slightly richer middle-class is not likely to rise enough in the short term to be able to afford the current housing prices.

It's certain that, after a period of stalemate, rich investors will have to lower their prices to make a sale, no matter how reluctantly.

Does this mean China is bound to burst in a bubble? It depends on how far and fast housing prices slide -- and how much it costs the banks.

Read the original article in Chinese

Photo -

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.

But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!