China's Economy Echoing 2008 Crisis: Expert Predicts Full-Blown Financial Turmoil

China’s economic future is put into question, drawing comparisons to Japan’s economic slowdown in the 1990s and possible indications of an impending financial crisis, said Rockefeller International‘s Managing Director Ruchir Sharma in an op-ed published in the Financial Times.

Sharma highlighted China’s aging population, high debt levels, and government interference as key factors contributing to its current economic state likened to Japan’s decline in the 90’s.

However, two potential scenarios were presented – a short-term recovery similar to Japan’s post-1990 property bubble burst, or a full-scale financial crisis akin to the U.S. situation in 2008.

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Sharma indicated that a recovery could be triggered by government stimulus measures, such as easier mortgage lending rules and tax rebates for home buyers. Despite the Beijing government’s reluctance towards heavy spending, recent weeks have seen a rollout of such measures.

China’s technological advancements, particularly in fields like AI and robotics, might also contribute to a potential recovery. Despite governmental crackdowns on large tech firms, China has maintained a significant lead over the U.S. in numerous tech fields.

On the flip side, China’s property market presents an ominous picture. With land and home prices contracting at an annual rate of around 5%, and local government revenue from land sales down 20%, a financial crisis cannot be ruled out.

Moreover, the rising U.S. interest rates limit China’s ability to use easy monetary policy to support its property markets, which could trigger a capital outflow and a crash in the renminbi.

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