Via Pragmatic Capitalist, SocGen analysts on the similarities between China and Japan, and what it portends for (as they contend) China’s imminent implosion:

Studying the lessons from Japan’s lost decade(s) is key for anyone seeking to understand today’s post-bubble world. But a closer reading of Japan’s financial history illuminates today’s China far more. In the early 1980s, on the eve of its financial liberalisation, Japan was the rising power from the East set to overtake the West. Younger and growing rapidly, it was still a decade away from its climactic and catastrophic bubble peak. This is where China is now…

They argue that the bubble will inflate when China liberalizes its currency. It’s already taken a lot of steps in that direction (settling cross border trade using Rmb, issuing Rmb bonds, listing wholly foreign stocks on the Shanghai exchange). Full convertibility may only be several years away: at that point the Rmb appreciates vis-a-vis the USD, to around 3-4Rmb per dollar. The argument is that money is flooding into China during this period, sticking to anything that looks remotely like an infrastructure project.

There are good reasons to be concerned about China within the next 20 or so years, but very few of them are because China bears any sort of similarity with Japan. From an American perspective the narratives are perhaps analogous purely due to the notion that ‘upstart liberalizing Asian country may overtake U.S. economic hegemony.’ That’s it, and it’s a rather ethnocentric viewpoint (SocGen analysts should be French?) They do point out important demographic trends, but this too is analogous with much of the rest of the world.

The two competing notions present within media discourse, 1) an overheating China destined to implode and 2) inevitable rise of great power are both oversimplifications, and not necessarily mutually exclusive, especially depending on your time scale and degree of geographic specificity within China.