China must take lessons from Japan's lost decade amid slowdown, says former central bank governor
- Japan’s lost decade refers to the period of economic stagnation that began in the 1990s, with China currently experiencing its own economic slowdown
- Zhou Xiaochuan, who served as governor at the People’s Bank of China from 2002 to 2008, was speaking at Chatham House in London
China needs to learn lessons from Japan’s lost decade to ensure the world’s second-largest economy does not suffer similar problems, former central bank governor Zhou Xiaochuan said on Tuesday.
Debt levels in China are too high, although the Chinese government is taking steps to try to de-leverage the economy, Zhou said in a speech at The Royal Institute of International Affairs, commonly known as Chatham House, in London.
The lost decade refers to the period of economic stagnation in Japan that began in the 1990s.
“Japan had very fast development and later then a so-called lost decade,” said Zhou. “The Chinese economy may have a similar over-leveraged problem, and we need to absorb the knowledge and lessons from what happened.”
China’s gross domestic product (GDP) last year expanded at its slowest pace since 1990, while corporate bond defaults hit a record high and banks’ non-performing loan ratio reached a 10-year high.
Zhou, who was the central bank governor from 2002 to 2008, making him the longest serving in that post, said he hoped high levels of household savings could be funnelled into supporting the development of the equity market, although China’s gross savings rate would likely slip from around 45 per cent of GDP to 40 per cent or lower in the future.
China would continue its financial sector reform and further open its markets to foreign investors, enabled in part by the increasing internationalisation of its currency, the yuan, he said.