Ethan Devine has a very good article in Foreign Policy sketching out Japan’s economic problems as a cautionary tale for China:
When China’s working-age population peaks in 2015, it will be 20 years after Japan’s crested the wave, but it will do so at a much lower level of prosperity than was Japan’s at that time. The harsh reality is this: Japan got rich before it grew old, and China will grow old before it gets rich. [...]
History has given China this moment to do what Japan could not. The Japanese did not seriously attempt to rebalance until their economy was well-developed, ossified, and allergic to change. So when the jig was up on their longstanding economic model, rather than rebalance, Japan unraveled. In this sense, the global financial crisis was serendipitous for China. By reminding China’s leadership that relying on exports means depending on unreliable foreigners, the crisis put the pain of rebalancing in perspective. It is not out of altruism that we have seen renminbi appreciation accompanying Chinese wage hikes and other rebalancing measures. A slight loosening of controls over media and finance could be in the offing. Deregulating the service sector might be a frightening political proposition, but perhaps less so than not having one when the exports dry up.
It is worth saying, however, that from a different perspective I can see how Japan just looks like a success story to many people. After all, Japan’s PPP-adjusted per capita GDP is about level with France and higher than Spain, Israel, or Italy. Most people around the world, in other words, are poorer than the Japanese. So “you’re going to end up like Japan” isn’t necessarily much of a nightmare scenario to leaders in the developing world. Devine’s point is that China won’t end up like Japan, but instead risks seeing its economic growth stall out at a much lower level of development. But making that argument stick requires at least as much attention to the significant differences between the economies as to the similarities.