Why Japan Is Rooting for China
By SHERYL WuDUNN -- March 7, 1999
TOKYO -- LAST year, Japan seemed to bite its lip as it
watched China's economy continue to boom. Japan was
suffering its worst slowdown in more than half a century,
and its rival was the only Asian country to survive the
Asian economic crisis with its reputation enhanced.
Commentators made
invidious comparisons between Chinese decisiveness and Japan's
inability to confront its economic problems.
All this was hard to take in Japan, Asia's largest economy,
and it hurt even more when President Jiang Zemin made a state
visit in November -- the first ever by a Chinese leader -- and
told Japan how terrible it had been in World War II. Nobody
wanted China's economy to collapse, but there was a bit of a
yearning for China to stumble and learn its vulnerability.
Now that has happened. China's economy is showing signs of
frailty, even though officials still hope for economic growth
this year of 7 percent. And Japanese business executives and
economists are finding that they are looking at China's
economy these days not so much with resentment or envy as with
apprehension.
"I'm very nervous about them following the same path as the
Japanese economy in the next five years," said Takashi
Hoshino, a China specialist and director for research at the
Institute for Socio-Economic Infrastructure and Services here.
"There are very big problems in China. In particular, the
situation of the financial sector -- the banking problems --
their situation is quite similar to Japan's recent
experience."
There are also huge differences. Japan's economy is more than
four times the size of China's. China can still enjoy catch-up
gains that are unavailable to Japan.
But some Japanese see in China a bit of their own experience.
China has enjoyed the go-go growth that Japan went through in
the 1980's. But since Japan's speculative economic bubble
burst in the early 1990's, it has taken eight years for the
nation to come to grips with fundamental problems that still
need to be solved.
As a Communist country trying to make the transition from
command economy to the market, China obviously has problems
Japan never faced; its dying state sector claims about 40
percent of total economic output. Japan, with 120 million
people, can tap into a savings pool of $9 trillion. China,
with about 1.2 billion people, does not have nearly as big a
savings pool.
But China also has the creeping burdens that have plagued
Japan: Government spending on public works to boost growth, a
practice of lifetime employment, growing public debt and a
broken financial system.
China's economy is expected to grow this year, while Japan's
is going to have to fight to reach zero growth. But like
Japan, China is facing the threat of deflation, as prices
begin to sink, as factories become idle and as inventories
rise with products no one wants.
With ailing state businesses trimming wages and workers,
Chinese consumers are increasingly worried about the future,
hoarding their money, rather than spending it, which would
help boost nationwide consumption. As in Japan, the only big
spender in China is the Government, which is pouring money
into concrete, bricks and mortar for bridges, dams and other
projects, even if they crumble thanks to hasty construction or
corruption.
A ND as in Japan, China's spending is swelling the budget
deficit to record levels. And the banking system, buckling
under bad loans amounting to 30 percent to 40 percent of the
nation's total economic pie, is reluctant to lend. China, like
Japan, is caught in a credit squeeze.
"People are very jittery," said Fred Hu, a China economist at
Goldman Sachs in Hong Kong. "They are moving from a world of
cradle-to-grave welfare system to a very uncertain brave new
world."
Economic relations between China and Japan are complicated by
more than a century of profound political and military
antagonisms. Many Chinese are irritated that Japan has not
apologized more forthrightly for World War II atrocities. Even
today, many young Chinese say with remarkable bluntness that
they hate Japanese people.
Some Japanese worry that China could become a militarist bully
in the next century the way Japan was in the middle of this
one.
"China can become as militaristic, as expansionist and as
arrogant as we were," said a Japanese legislator who travels
to China regularly.
The possibility that the two largest economies in Asia could
both be ailing troubles many economists. Many Japanese
recognize that growth in China would help maintain stability
in the region by maintaining the flow of trade and a firm
exchange rate.
"We are not in the habit of rejoicing in the misfortunes of
others," said Sakaaki Numata, a spokesman for the Japanese
Foreign Ministry.
"And I'm not quite sure what is happening in China can be
described as misfortune just yet."
Copyright 1999 The New York Times Company |
