While rapid investment has turned
China into one of the 21st century’s fastest-growing major economies, it
also led to overproduction in industries from steel to cement and
sparked concern that some projects will fail to generate the returns
needed to service a record build-up of debt. China’s ratio of investment
to gross domestic product has exceeded that of Japan in the late 1980s,
just before a bursting of that nation’s real-estate bubble ushered in
more than two decades of anemic growth, according to the International
Monetary Fund.
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What do China and Japan have in common? Neither of them have a lot of oil reserves. So, both have to buy oil outside of their countries. This puts both of them at a disadvantage, even though China has made a great oil deal with Russia which likely will help this a lot.
So, will China now go the way of Japan's economy the last 20 years?
It's hard to say but very likely because it is very hard to manage an economy with a land mass as big as China's, especially when you have 300 million people (like the U.S.) at Middle Class or above but with an almost equal number of people that are poor with Tuberculosis. So, you have an economy that is very poor and very rich simultaneously which is unlike any other nation I know of on earth.
So, we'll see.
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