Is China’s Economic Predicament as Bad as Japan’s? It Could Be Worse

HONG KONG—Starting in the 1990s Japan became synonymous with economic stagnation, as a boom gave way to lethargic growth, declining population and deflation.

Many economists say China today looks similar. The reality: In many ways its problems are more intractable than Japan’s. China’s public debt levels are higher by some measures than Japan’s were and its demographics are worse. The geopolitical tensions that China is dealing with go beyond the trade frictions Japan once faced with the U.S.

Another headwind: China’s government, which has been cracking down on the private sector in recent years, seems ideologically less inclined than Tokyo was then to support growth.

None of this means China is sure to repeat the years of economic stagnation that Japan is only now showing signs of exiting. It has some advantages that Japan didn’t. Its economic growth in coming years is likely to be well above Japan’s in the 1990s.

Even so, economists say the parallels are a warning for Communist Party leaders in Beijing: If they don’t act more forcefully, the country could get stuck in a protracted period of economic sluggishness similar to Japan’s. Despite piecemeal steps in recent weeks, including modest interest-rate cuts, Beijing has held back on major stimulus to revive growth.

“China’s policy responses so far could put it on track for ‘Japanification,’” said Johanna Chua, chief Asia economist at Citigroup. She believes China’s overall growth prospects could be slowing more sharply than Japan’s.

China today and Japan 30 years ago share many similarities, including high debt levels, an aging population and signs of deflation.

During a long postwar economic expansion, Japan became an export powerhouse that American politicians and corporate executives worried would be unstoppable. Then in the early 1990s, real estate and stock market bubbles burst and the economy hit the skids.

Policy makers cut interest rates to virtually zero, but growth failed to rebound as consumers and companies focused on repaying debt to repair their balance sheets instead of borrowing to finance new spending and investment.

Richard Koo, an economist at the research arm of Japanese investment bank Nomura Securities, famously coined the term “balance sheet recession” to describe the phenomenon.

China, too, has seen a property bubble pop after years of extraordinary economic growth. Chinese consumers are now paying off mortgages early, despite government efforts to get them to borrow and spend more.

Private firms are also reluctant to invest despite lower interest rates, stirring anxiety among economists that monetary easing might be losing its potency in China.

By some measures, China’s asset bubbles aren’t as big. Morgan Stanley estimates that China’s ratio of property value to gross domestic product peaked at 260% in 2020, up from 170% of GDP in 2014; home prices have only fallen slightly since the peak, according to official data. China’s equity markets hit a recent peak of 80% of GDP in 2021 and now sit at 67% of GDP.

In Japan, land values as a percentage of GDP reached 560% of GDP in 1990 before falling back to 394% by 1994, Morgan Stanley estimates. The Tokyo Stock Exchange’s market capitalisation rose to 142% of GDP in 1989 from 34% in 1982.

Also in China’s favour, its urbanisation rate is lower, standing at 65% in 2022, versus Japan’s, which was at 77% in 1988. That could give China more potential to raise productivity and growth as people move to cities and take on nonagricultural jobs.

China’s tighter control over its capital markets means the risk of a sharp appreciation of its currency, which would harm exports, is low. Japan had to deal with a sharp increase in its currency several times in recent decades, which at times added to its economic struggles.

“We believe worries on China being trapped in a balance sheet recession are overdone,” economists from Bank of America recently wrote.

Yet in other ways, China’s problems will be harder to tackle than Japan’s.

Its population is ageing faster; it began to decline in 2022. In Japan, that didn’t happen until 2008, nearly two decades after its bubble burst.

Worse, China appears to be entering a period of weaker long-term growth rates before reaching rich-world status, i.e. it is getting old before it gets rich: China’s per capita income was $12,850 in 2022, much lower than Japan in 1991 at $29,080, World Bank data shows.

Then there is the problem of debt. Once off-balance-sheet borrowing by local governments is factored in, total public debt in China reached 95% of GDP in 2022, compared with 62% of GDP in Japan in 1991, according to J.P. Morgan. That limits authorities’ ability to pursue fiscal stimulus.

External pressures also appear to be tougher for China. Japan faced a lot of heat from its trading partners, but as a military ally of the U.S., it never risked a “new Cold War”—as some analysts now describe the U.S.-China relationship. Efforts by the U.S. and its allies to block China’s access to advanced technologies and reduce reliance on Chinese supply chains have sparked a plunge in foreign direct investment into China this year, which could significantly slow growth in the long run.

Many analysts worry Beijing is underestimating the risk of long-term stagnation—and doing too little to avoid it. Moderate cuts to key interest rates, lowering down payment ratios for apartments and recent vocal support for the private sector have done little to revive sentiment so far. Economists including Xiaoqin Pi from Bank of America argue that more coordinated easing in fiscal, monetary and property policies will be needed to put China’s growth back on track.

But President Xi Jinping is ideologically opposed to increasing government support for households and consumers, which he derides as “welfarism.”

From Scotch whisky and luxury retreats to fashion collaborations and world-class hospitality, Ross Blainey has spent years shaping high-end experiences around one idea: modern luxury is no longer just about what you own.

It is about access, connection and moments money alone cannot buy.

As Citizen Kanebridge continues to grow as one of Australia’s most sought-after private members’ clubs, Blainey, the club’s new Head of Membership, says the future lies in creating experiences members cannot find anywhere else.

“The ultimate memorable experiences are the money can’t buy moments,” Blainey said.

“The things that you can’t just put together anytime or any place. They make up something that is greater than the sum of its parts.”

On June 4, Blainey will bring that philosophy to life when he hosts an exclusive whisky evening for Citizen Kanebridge members at Sydney’s Royal Automobile Club of Australia.

Titled A Journey Through Whisky, the intimate event will see Blainey guide members through a curated selection of rare and unreleased whiskies drawn from his personal archive, alongside stories gathered across years working at the highest levels of the Scotch whisky world.

The evening will also include reflections on Blainey’s induction as a Keeper of the Quaich at Blair Castle in Scotland last year, one of the whisky industry’s rarest global honours.

A career built around experience

Before joining Citizen Kanebridge, Blainey built a career spanning luxury hospitality, Scotch whisky, premium lifestyle brands and experiential events.

But he says one industry above all others shaped the way he thinks about people and community: Scotch whisky.

“At its core, at its heart and throughout its whole history, Scotch has been about sharing, enjoyment, telling stories, meeting people and generally having a good time,” he said.

“Whisky can be that shared moment of laughter, and it can also be a shared moment of just slowing down, taking stock and contemplating. These are so key to building community.”

Blainey’s deep involvement in the whisky world culminated in 2025 when he was inducted as a Keeper of the Quaich at Blair Castle, a recognition is reserved for a select group of individuals who have made an outstanding contribution to Scotch whisky internationally.

“I was inducted last year, 2025, an incredible honour,” he said.

“There were a couple of teary-eyed moments as I stood in Blair Castle, on historic ground, realising that this was a moment I would remember forever.”

The next chapter for Citizen Kanebridge

Looking ahead, Blainey says Citizen Kanebridge will continue to focus on highly curated experiences, exclusive access, and bringing together like-minded members from Australia’s property, finance, and investment sectors.

“Our baseline of Car of the Year is already one of the most impressive events on the social calendar of Australia,” he said.

“My job is to find a way of raising the bar, taking things to the absolute top level for access, experiences and events.”

Blainey said the long-term goal was not simply to create another networking group or luxury club, but to build a community centred around meaningful relationships and unforgettable experiences.

“We provide the access, the money can’t buy memories, and we will be making those happen regularly,” he said.

“If we start with how amazing Car of the Year is and the only way is up, we are going to have some mind-blowing moments for our members.”

Hospitality at its absolute best

Another major influence on Blainey’s thinking came through his connection with world-famous New York restaurant Eleven Madison Park, once named the best restaurant in the world.

He says two concepts from the restaurant’s owners still shape the way he approaches luxury experiences today: “enlightened hospitality” and “unreasonable hospitality”.

“Enlightened hospitality is a way of doing business that looks at not just the product of what you serve, but how it makes people feel,” Blainey said.

“Unreasonable hospitality is more about striving for the absolute best all the time. If you’re going to do something, do it to an unreasonable level that blows everything else out of the water.”

It is a philosophy, he says, which aligns closely with where Citizen Kanebridge is heading next.

“That’s what we’re doing here with CK, taking members’ experiences to another level,” he said.

Fashion, whisky and creative collaborations

Blainey’s career has also included working with Glenfiddich as a Creative Collaborations Lead, where his role centred on bringing luxury experiences and partnerships to life through designers, chefs, artists and bartenders.

Among the projects were runway collaborations with leading Australian fashion designers, with pieces from the partnerships now housed inside Sydney’s Powerhouse Museum.

“My job was to find a creative way of bringing the brand to life,” he said.

“How do we make something that none of us could make on our own? Searching for the things that will resonate with people.”

What luxury consumers want now

Beyond whisky and events, Blainey also played a key role in building Blackbird Byron, the boutique Byron Bay hinterland retreat later recognised in Tatler’s Top 101 Hotels list.

The property, known for its dramatic views, minimalist architecture, and secluded atmosphere, helped shape his understanding of how luxury consumers are changing.

“I think I learned that people looking for luxury in hotels want memorable moments, considered design and the ability to get away from the hustle and bustle of modern life,” he said.

“To feel at home without being at home is important.”

More broadly, he believes today’s luxury consumers are increasingly driven by authenticity and emotional connection.

“For luxury consumers overall, I think it comes down to craft, story and connection,” he said.

“The product itself has to be impeccable, the story behind it builds your reason for looking at it, and then you need to make a genuine connection with people.”

Interested in becoming a member of Citizen Kanebridge? You can contact Ross here.